Allianz, Charter Hall pay Aldi $648m for logistics portfolio

Aldi’s Dandenong South distribution centre, about 41 kilometres south east of Melbourne.

Allianz Real Estate, on behalf of several of its group companies, with Charter Hall Group managed Charter Hall Prime Industrial Fund (CPIF), is paying Aldi $648 million for a portfolio of four purpose-built distribution centres on Australia’s east coast.

Based on the combined total annual income ($30.1m) the passing yield is 4.6 per cent.

The investment at 1 Sargents Road, Minchinbury (above), was one of two Aldi offered in Sydney. The other is at Prestons (below).

All up the assets contain more than 218,000 sqm of building area.

The occupier listed the warehouses in February with c$700m price hopes.

Last month, Mirvac, as part of an entity with Morgan Stanley, was one of two prospective suitors said to be considering them.

The Prestons warehouse at 10 Burando Road. Source: Google Street View.

Hong Kong-based logistics giant ESR – which in March announced an expansion via the $1 billion Australian Logistics Fund – was another.

However Charter Hall, with a c$6b track record buying sale-and-leaseback investments since 2014, has been mooted as a possible purchaser since the Aldi properties were listed.

JLL Capital Markets Industrial and Logistics’ Tony Iuliano, Adrian Rowse, Roger Miller and Gary Hyland were the marketing agents.

The Aldi distribution centres

The Aldi properties were offered leased for seven years with multiple seven year (renewal) options.

Two of them are in Sydney: 1 Sargents Road, Minchinbury, 38 kilometres west of town, and 10 Burando Road, Prestons, about the same distance south west.

Combined, these assets contribute 55 per cent to the portfolio’s annual revenue.

The Melbourne distribution centre is at 41 Colemans Road, in the valuable south east industrial hub of Dandenong South.

In Brisbane, Aldi’s logistics centre is at 68 Kremzow Road, Brendale, about 22kms north west of the city.

The purchaser is a Charter Hall managed 50/50 joint venture partnership comprising the $6b wholesale fund CPIF with Allianz Real Estate, Charter Hall managing director and group chief executive officer, David Harrison, said.

Charter Hall and leasebacks

Since 2014, Charter Hall has spent more than $6b on Australian sale-and-leaseback investments.

Last December alone, its Direct Industrial Industrial Fund No 4 paid Beacon Lighting $28m for an ex-Masters store turned distribution centre in Brisbane’s Parkinson, while CPIF and Charter Hall Long WALE REIT (CLW) spent a total of $397.8m on a manufacturing plant occupied by Arnott’s, in Sydney’s Huntingwood.

Charter Hall also reset leases with GWA Group – the owner of tap wear producer and distributor Caroma – for three industrial assets on Australia’s east coast (the landlord formed its relationship with this occupier after previously buying a western Sydney property from it as a sale-and-leaseback investment).

In that month, too, CLW and Charter Hall Retail REIT paid BP $825m for a 49pc stake in 225 service stations – the majority of the vendor’s investments of this type nationally (soon after, it was said to be interested in acquiring a bigger share).

Last November CPIF snapped up a Dandenong South industrial holding from Viridian Glass for $100m with a leaseback expiring in 2028.

Ten months ago Charter Hall gave Greenacre Developments $30.9m for its distribution centre at 282-290 Hammond Street, also in Dandenong South.

In November, 2018, it paid the federal government $118.5m for two properties leased to Australian Border Force, in Bulla, Melbourne and at Sydney in Banksmeadow, about 30kms from a National Archives of Australia rented warehouse in Villawood, which set it back $55m at about the same time.

Also in that month it acquired the 8.1 hectare Coburg Drive Inn for $12m from Village Roadshow, with a lease expiring in 2028.

Charter Hall has purchased leaseback investments from Bombardier Transport, Bunnings, Coca Cola Amatil, Inghams, Peters Ice Cream and Telstra, too.

But it doesn’t jump at every opportunity – last year being less bullish about bidding on two Arnott’s factories, in Brisbane and Adelaide, later snapped up for $236.2m by Centuria Industria REIT.

Charter Hall and Allianz on the Aldi portfolio

“We are delighted to once again extend our cross-sector relationship with Aldi,” Mr Harrison said, which “will become a sizeable cross sector tenant”.

“Further, combining the balance sheet strength of CPIF and its partner Allianz Real Estate gave Charter Hall a competitive advantage in convincing Aldi that we could deliver an unconditional executed transaction within a short timeframe, having recently secured FIRB approval for the transaction,” the executive added.

“Accessing the on-going growth and resilience of grocery retailing in Australia has been a consistent thematic driving the growth of our Industrial and Logistics portfolio toward $10b and beyond, now representing 25pc of our enlarged $40b platform.

“This transaction is in line with our strategy of aligning our investments to secular mega trends in the Asia-Pacific region.

“Demand for logistics in Australia is underpinned by growth in e-commerce, increasing international trade and the resilience of non-discretionary retail spending”.

Allianz Real Estate Asia Pacific chief executive officer, Rusabh Desai, expects the acquisition “will provide our investors an attractive distribution yield”.

“We value our long-standing relationship with Charter Hall, and we are very excited to partner with them on the acquisition of the Aldi logistics portfolio.

The company is known to it in Germany, Mr Desai added, “and we are pleased to broaden the relationship with them”.

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Marc Pallisco

A former property analyst and journalist, Marc is the publisher of realestatesource.com.au.

Marc Pallisco