Charter Hall (ASX.CHC) upgrades fiscal 2026 guidance for a third time in just over six months. Management now expects operating earnings of $1.03 per security, up from $1.00 previously, representing 27% growth from last year. Securities jumped 7%.

Why it matters: Charter Hall stands out at a time when most sector peers are cautious about next year’s outlook amid interest rate uncertainty. The platform has attracted $6.5 billion of gross equity inflows in the fiscal year to date, on track for the strongest year of capital inflows in the group’s history.

  • The firm also has good momentum in winning institutional mandates, securing over $3 billion in new funds under management so far this year. We lift our near- to medium-term earnings growth forecasts in line with the robust FUM gains.
  • We think recent changes in capital gains tax and negative gearing should add modestly to demand for commercial property at the expense of residential, given lower yields and removal of tax benefits. We therefore upgrade our midcycle average FUM growth forecast slightly.

The bottom line: We increase our fair value estimate by 5% to $20.50 per security for narrow-moat Charter Hall, on slightly higher earnings forecasts.

  • Year to date, its security price is down 16% on rising bond yields and concern over FUM growth. The three guidance upgrades and solid inflows this year assuage some of the fear. Securities are close to fairly valued.

Long view: We expect momentum to slow in the coming years. While Charter Hall is the industry leader, property funds management is a competitive business, and we think fee compression is likely in the long run.

  • Over the next decade, we expect Charter Hall’s FUM to grow at 6.7% per year on average, which is among the highest in the property funds management space.

Key stats: Its distribution target of $0.507 per security is maintained, up 6% year on year and equivalent to a 2.5% yield.

Charter Hall Group is on a guidance upgrade streak

Charter Hall manages retail and institutionally listed and unlisted property investments. Management base fees and property services fees are relatively stable. The group also co-invests in many of its vehicles to align interest with funds management clients. But we expect less co-investments in the future as parking money in its own funds ties up capital.

The platform has attracted $6.5 billion of gross equity inflows for fiscal 2026 year to date, on track for the strongest year of capital inflows in the group’s history. Longer-run, however, we expect growth of funds under management to moderate, as competition intensifies—nearly all major REITs are expanding their funds management capacity. Nonetheless, we still assume higher FUM growth for Charter Hall than most of its peers (except Goodman), given its scale and track record.

The group has been acquisitive. Except for fiscal 2024 and 2025, it had been a net acquirer in the past decade, averaging $3 billion net acquisitions (acquisitions less divestments) a year. This is likely to continue. Charter Hall has a significant development pipeline of $18 billion as at the end of December 2025, which should boost funds under management once completed.

Charter Hall carefully curates a defensive and resilient portfolio, with long lease expiries, diverse sector exposure, a diversified tenant profile, and stable occupancies. An example of its strategic manoeuvres are sale and leaseback deals. Charter Hall would acquire sites that are already occupied and lease them back to the same tenants under “triple net” leases, where tenants agree to pay most outgoings and expenses. The quality-focused portfolio underpins fund performance and also saw rental income relatively unscathed through the covid-19 crisis, with nowhere near the damage that rival REITs experienced.

Bulls say

  • Charter Hall’s investment vehicles are gaining investor inflows due to their scale, strong track records, management expertise, and significant development pipeline.
  • The funds management property portfolio is high quality, with long lease expiries, defensively positioned sector exposure, and diversified tenant portfolio.
  • New fund inflows add to Charter Hall’s base fee revenue. Although it is not risk-free, long lock-ins on its funds management vehicles bestow annuity-like characteristics to this revenue.

Bears say

  • Low interest rates had encouraged the strong demand for Charter Hall’s property funds in the past. However, record low interest rates during covid are unlikely to return.
  • Rival REITs are racing to compete in the property funds management sector. Management fees could be squeezed.
  • Over a third of Charter Hall’s funds management portfolio is office. Office demand has been hurt by structural threats from hybrid working and is also sensitive to business conditions and market sentiment.