Charter Hall Group

Charter Hall Group

A portfolio stock in focus for Sage is Charter Hall Group. The group has over $83 billion funds under management and operates across core real estate sectors including Industrial & Logistics, Office, Retail, and Social Infrastructure.

Its revenue primarily comes from investment management, transaction and property services fees generated from over 30 retail and institutional unlisted funds, as well as three listed REITs.

Sage believes Charter Hall is the best way to play cap rates stabilising across the property sector and will benefit from several tailwinds over the next few years. Namely:

• Transaction and performance fees will bounce off trough levels. These have been subdued for the last couple of years as falling property valuations led to a reluctance to ‘catch a falling knife’ and participate in transactions. With obvious signs of asset stabilisation, and increased interest from asset allocators in playing the turnaround, flows and thus transaction fees will increase from low levels.

• Office market valuations have bottomed, and transaction activity will return spurred on by interest rate cuts. Fundamentals within the office market are improving due to a combination of constrained supply and strong demand from tenants.

• With EBITDA margins in the low 80s, any funds under management and fee growth will drop quickly to the bottom line, providing the best exposure to improving conditions in the real estate sector.

Source: Sage Capital

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