Two Charter Hall funds behind $397.8 million purchase of Arnott’s Huntingwood plant and distribution centre

Two Charter Hall funds will co-own a major food production facility and distribution centre in Sydney, leased to Arnott’s.

Charter Hall Prime Industrial Fund (CPIF) and Charter Hall Long WALE REIT (CLW) will hold an equal stake in 61 Huntingwood Drive, Huntingwood, after each outlaying $198.9 million.

The deal is being struck in an estimated 4.5 per cent passing yield.

The property was offered by US-based private equity giant KKR which in July acquired the Arnott’s business for $3.14 billion.

KKR subsequently listed for sale three Arnott’s occupied properties via UBS and CBRE.

Yesterday we reported that Centuria Industrial REIT was paying $236.2 million for the other investments – in Brisbane and Adelaide.

The property as seen from Huntingwood Drive.

Arnott’s Huntingwood

The Huntingtwood factory is where Arnott’s produces the majority of its products.

On a 16.4 hectare site also bound by the Western Motorway and Brabham Drive, it includes improvements measuring about 59,000 square metres, configured with a modern food making plant, oven hall, packaging facilities and offices.

A high bay facility is currently under construction.

KKR offered the investment with a 32-year triple net lease to Arnott’s with multiple 10 year options.

Following the deal, the weighted average lease expiry (WALE) of the CPIF portfolio increases from 9.8 years to 10.7 years.

Charter Hall chief investment officer Sean McMahon said the deal “continues our momentum with long WALE acquisitions and demonstrates the Group’s capacity to combine funds to close large scale and leaseback transactions, quickly and efficiently with the desired timeframes of vendors”.

Richard Stacker, Charter Hall Industrial and Logistics chief executive officer added that Arnott’s products are found in 95 per cent of Australian households, and the business has a 61 per cent share of the national biscuit market.

“CPIF and CLW’s acquisition at $397.8 million is one of the largest individual asset sales recorded in Australia,” the executive added.

Huntingwood is about 35 kilometres west of the city.

The site is near the M4 and M7 motorway junction, giving it excellent access to the Sydney Orbital Network, Mr Stacker said.

Fund manager, Richard Mason, added “the acquisition is consistent with CPIF’s strategy to acquire core industrial and logistics properties close to major transport infrastructure, leased to major corporate customers on long-term leases”.

Near to this site, Charter Hall controls the Huntingwood Industrial Estate at 11-15 Huntingwood Drive.

CPIF’s numbers, post Arnott’s Huntingwood sale and leaseback deal

Sydney industrial property will form 35 per cent of CPIF’s weighting following the settlement of 61 Huntingwood Drive – up from 32 per cent.

Arnott’s will also become one of the largest tenants within CPIF’s portfolio, along with Woolworths, Coles, Coca Cola and Metcash.

About 23 per cent of the Fund’s revenue will be derived from tenants on triple net leases (up from 20 per cent).

Publicly listed or nationally/globally recognised tenants, and the government, occupy 95 per cent of it.

With 63 properties, CPIF will be worth close to $7 billion.

The Fund won’t need to engage in a capital raising to fund its Huntingwood purchase: it did so earlier this year and closed significantly oversubscribed (with these proceeds, CPIF also recently acquired the Viridian Glass facility in Melbourne’s Dandenong South for $100 million).

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Marc Pallisco

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

Marc Pallisco