Charter Hall to sell interest in Desco, Regency

Property investment company Charter Hall Retail REIT (ASX:CQR), formerly Macquarie CountryWide Trust, has entered into a conditional agreement to sell its 60 per cent interest in a US portfolio of 32 properties, owned in partnership with Desco Group and Regency Centres.

Parties associated with the Desco Group will acquire Charter Hall Retail REIT's interest for a gross sale price of US$168 million (approximately A$1711 million), representing a yield of 8.5 per cent. At the same time, Regency has elected to take a distribution in kind of four assets for its 16 per cent interest.

The deal when closed will eliminate US$107.0 million of property-level debt, will release approximately A$64.72 million of proceeds and will reduce Charter Hall Retail REIT's balance sheet gearing by 2.1 per cent and look through gearing by 5.1 per cent, the company said in a statement on Monday.

The price reflects a discount of 4.3 per cent on the June 2010 book value. The transaction remains conditional on the purchaser obtaining approval from the principal lender and documentation of the agreement between Regency and Desco for the distribution in kind. Both conditions are expected to be met over the coming months with settlement due to occur by the end of March 2011.

The portfolio sale, which accounts for approximately 53 per cent by value of the remaining US investments, delivers on the Charter Hall Retail REIT's strategy of re-weighting its portfolio to Australia and will increase the proportion of net tangible assets (NTA) represented by the Australian portfolio to 78 per cent.

Charter Hall Retail REIT chief executive Steven Sewell said: "Today's announcement is another step in the delivery of our key objective of realising the equity from our investments in the United States and New Zealand, with the proceeds of this sale to be reinvested into sub-regional shopping centres in Australia.

"On completion of this sale, the REIT's United States portfolio will represent only 8 per cent of NTA and we remain on track to achieve the sell down of the majority of the balance of our United States investments by June 2011," he said.

By 11am AEST, shares in the company rose three cents or 0.99 per cent at $3.07.