Centennial buys $35m warehouse to close out first fund with KKR
Fund manager Centennial has acquired a large-scale logistics facility in western Sydney’s St Marys for $35.3 million in a deal that closes out its first partnership fund with the real estate arm of private equity giant KKR.
The 31,850-square-metre site at 243 Forrester Road is the last asset to be acquired by the mid-space-focused CILP 1 fund the specialist industrial fund manager and KKR founded at the start of the pandemic to redevelop and hold logistics and warehouse sites.
However, the onset of the pandemic that supercharged the growth of e-commerce and the logistics properties underpinning it, created difficulties in finding a suitable final asset for the fund that takes mid-sized properties and invests in them to boost their value.
“The market in our view got overheated,” Centennial executive director and industrial and logistics head Paul Ford told The Australian Financial Review.
“It’s taken us a while to find this last asset, but we are starting to see some value re-emerging again because cap rates have softened a bit.”
The closed-end fund has a gross asset value of about $475 million, which Centennial will boost to its planned $550 million. This will come in part by extending the warehouse at the rebranded Central West Distribution Centre and building a new hardstand, lifting its end value to $65 million.
In March, Centennial started putting together a second, $650 million, Build 2 Core (B2C) Partnership Fund with KKR, which was more of a pure-development fund than the repositioning nature of CILP 1, Mr Ford said.
The company bases its business on mid-space properties, which allow it to compete for assets that are bigger than many private owners target but smaller than those large institutions focus on.
“We’re playing in the space where we can acquire assets typically smaller, in the $10 million to $40 million range, but we also often develop them out,” he said. “We can create bigger estates. We try to avoid competition with bigger institutions but end up creating big institutional product.”
Centennial was “in good discussions with a couple of global partners” about starting a third fund – about the size of the CILP 1 fund that acquired the St Marys asset – which would close by the year’s end.
KKR could also be a partner in that fund, but it would likely include other parties as well, Mr Ford said.
The St Marys acquisition, brokered off-market by Colliers International’s Gavin Bishop and Sean Thompson, gives the CILP 1 fund a total of 23 assets covering 206,000sq m of gross floor area.
The property has dual entry-exit points and more than 1000sq m of office and amenities, and 14,153sq m of high clearance warehouse or manufacturing space. It was leased to Chrisco Hampers before settlement for the short term.
The site is located less than five kilometres from the Great Western Highway and M4 Motorway and two kilometres from Pacific National’s St Marys Freight.
It is also close to Sydney’s major distribution centres, Amazon’s Fulfilment Centre and the future Western Sydney International (Nancy-Bird Walton) Airport, which is on track to begin operations in 2026.