Charter Hall swoops on Aldi's warehouses
While COVID-19 is playing havoc among retail landlords, industrial and logistics owners are benefiting from the surge in e-commerce and demand for warehouses, prompting strong deal making in the sector.
Fund manager Charter Hall has leapfrogged at least nine other contenders to buy four large Aldi distribution centres for $648 million in a joint venture deal with Allianz Real Estate.
The four facilities in Sydney, Melbourne and Brisbane were designed and built by Aldi to service its 500-strong chain of discount supermarkets. It offloaded them in a sale and leaseback deal with seven-year leases in place, plus multiple seven-year options.
The assets will be jointly owned by the $6 billion Charter Hall Prime Industrial Fund (CPIF) and several Allianz companies.
JLL’s Tony Iuliano, Roger Miller, Adrian Rowse and Gary Hyland negotiated the sale for Aldi.
The transaction was struck on an initial yield of 4.75 per cent, a price that reflects the asset’s high build quality, its strong tenant, Aldi, and factors in 3 per cent annual rent increases, Charter Hall managing director and chief executive David Harrison said.
“There’s an acceleration in demand driven by e-commerce and by growth in grocery retailing,” Mr Harrison said. That is likely to drive cap rates lower and prices up over the next year.
Combining CPIF’s balance sheet strength with Allianz gave Charter Hall a competitive advantage in convincing Aldi it could deliver an unconditional transaction within a short timeframe, he said.
Charter Hall secured foreign investment review board approval beforehand.
The fund manager has been busy boosting its industrial property exposure, particularly among Australia’s four main grocery retailers – Woolworths, Coles, Aldi and Metcash.
It recently signed another large $400 million deal to buy two high-tech sheds Coles is constructing in Sydney and Melbourne for its online grocery platform, automated fulfilment and home delivery business.
“Of all the sectors out there, industrial and logistics is probably going to be the one sector that benefits out of COVID-19,” Mr Harrison said.
Unlike their retail counterparts, industrial landlords have provided relatively little rent relief as a result of the pandemic.
Industrial behemoth Goodman Group has reported increased demand for both temporary and permanent space from food, consumer goods and logistics, particularly related to e-commerce operators and others transitioning online.
Mr Harrison said he expects industrial to be the top performing sector in coming years. Low vacancy levels will drive rental growth and institutional investors have under allocated funds to industrial, more than any other sector, and are now re-weighting their portfolios, he said.
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