Charter Hall resets leases with Coles for distribution centres in Adelaide, Perth

EXCLUSIVE

In a surprise and strategic move, Charter Hall Group and Coles have extended tenancy terms for major distribution centres in Adelaide and Perth.

The 15-year deals, which kick in on January 1, 2020, will see the leases for both properties expire at the same time, in December, 2034.

Coles’ rental agreement at Adelaide was due for renewal in 2027 with Perth a year later.

Coles chief property officer, Thinus Keeve, said the Adelaide and Perth distribution centres supply fresh, frozen, chilled and ambient temperature food and groceries to more than 150 Coles supermarkets.

Combined, they cover 40 hectares of land area.

The Edinburgh Parks property

The Adelaide property in Edinburgh Parks was purpose built for the occupier in 2007.

It includes a 67,947 sqm distribution centre with a temperature-controlled warehouse and two storey office.

About 25 kilometres north of the city centre, this property services Coles stores in South Australia and the Northern Territory.

Charter Hall Direct DCD Trust owns 52 per cent of this investment. The balance is split equally between Charter Hall Direct Fund No 2 and Charter Hall Direct Fund No 3.

The Perth Airport complex

At 81,647 sqm, the Perth distribution centre is larger than Adelaide. It also includes a temperature-controlled warehouse, and onsite administration buildings.

Coles distributes to a Western Australian store network from the Perth Airport property, 15 kilometres east of the city centre.

This asset is secured by a lease from Perth Airport with 77 years remaining.

Charter Hall’s Long WALE REIT owns 49.9 per cent of Coles’ Perth distribution centre. Charter Hall Direct Fund controls 25.1 per cent, while Charter Hall Direct Fund No 2 has a 25 per cent stake.

Supermarket giants are an important client for Charter Hall

Charter Hall owns four distributions leased to Coles – including in Sydney, Melbourne and the two which it has just re-rented.

It also controls a national portfolio of 34 Coles occupied supermarkets – some with liquor stores attached.

Charter Hall also owns Coles’ distinctive office headquarters – known locally as Battlestar Galactica – at 800 Toorak Road, Tooronga (part of East Hawthorn), in Melbourne’s east.

The Sydney-based developer and fund manager is in with Coles’ main rival, too: in August, Charter Hall announced it would build a 40,000 sqm distribution centre in Melbourne’s Truganina, for Woolworths.

In 2018, Charter Hall Prime Industrial Fund and Core Logistics Partnership acquired a 16.7 hectare distribution centre in Sydney’s Smeaton Grange (pictured, top), tenanted to Coles.

Charter Hall Industrial chief executive officer Richard Stacker said the lease extensions secure “a long-term cash-flow underpinned by strong tenant covenant, thereby further enhancing the quality of the funds that own these two assets”.

…because not all of them want to rent their real estate

Supermarkets including Aldi, Coles and Woolworths, deal within the office, retail, industrial and logistics sectors – as renter and investor.

In March we reported that German hypermarket Kaufland was planning to build, own and occupy, a landmark c115,000 sqm distribution centre in Melbourne’s north.

Kaufland has also been recently snapping up development sites to build as supermarkets (in August, we reported about it buying a Brisbane shopping centre, expected to be refit for the owner’s sole use).

One of these retail stores will include office space the group will occupy as its headquarters.

This year, Coles and Woolworths have acquired real estate assets – and sold them, often with leasebacks.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco
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