Charter Hall Acquires Folkestone in $205 Million Deal

Property fund manager and developer Charter Hall has struck an agreement to purchase Folkestone, a smaller property fund manager.

The $205 million deal was announced as both companies reported end of financial year earnings.

Charter Hall said the deal would expand its focus into social infrastructure and the early learning sector which is underpinned by a growing population, rising workforce participation and government funding.

“We see the Folkestone business model as consistent with our existing strategy,” Charter Hall chief executive David Harrison said.

The transaction with Folkestone will grow Charter Hall's funds under management by $1.6 billion, boosting its fund management and development investment earnings.

“We are attracted to their leading position in the social infrastructure sector and the suite of listed and unlisted funds adds to our diversity of sources of equity, while their origination capability is expected to generate property investments for the expanded list of managed funds,” Harrison said.

Charter Hall reported its 2018 financial results, seeing a 16.2 per cent lift in operating earnings of $175.8 million on the previous year.

“I am pleased to deliver to our investors a 5 per cent increase in operating earnings per security to 37.7 cents and a full year distribution per security of 31.8 cents, an increase of 6 per cent,” Harrison said.

Folkestone managing director Greg Paramor said the deal was an excellent fit of two companies.

“Folkestone brings significant expertise and skills in the fields of social infrastructure and early learning,” Paramor said.

Folkestone has a series of listed, unlisted and private funds and has a market capitalisation of around $164 million.

“Folkestone’s other existing unlisted funds also complement Charter Hall’s existing platform, providing opportunities for Charter Hall to either grow these funds, or create new fund initiatives leveraging Folkestone’s extensive private client network and Charter Hall’s extensive distribution network,” Paramor said.

In 2010 Paramor, along with Equity Real Estate Partners, took over Folkestone and quickly transformed the company into an elite fund manager.

Folkestone shareholders will now be entitled to a $0.03 per share ordinary dividend for the 2018 financial year.

Once the deal is finalised, Folkestone's Greg Paramor, a former Mirvac executive, will become a non-executive independent director of Charter Hall Group.

Last year, Folkestone entered into a joint venture with Melbourne-based ID Land to develop 64 townhouses in Melbourne, known as The Walter valued at $40 million.