Goodman Group is buying an entire homemaker hub at Alexandria in South Sydney in a $200 million deal, a significant addition to its development pipeline that highlights the rising value of industrial real estate.
The deal with the hub’s owner, private investment vehicle Arkadia, is being struck on a tight yield below 4 per cent.
The transaction will be settled through a cash and scrip arrangement that will be finalised within weeks, according to market sources. The property will be held in the Goodman Australia Industrial Partnership.
For Goodman, the 3.4 hectare site occupied by the Alexandria Homemaker Centre on O’Riordan Street adds to its development portfolio in the vicinity, which includes Sydney Corporate Park and another large format centre at nearby 494 Gardeners Road, which Arkadia had also previously owned.
Arkadia was set up by Greg Karedis and Peter Cortis-Jones and has a portfolio of 18 assets, including large format retail hubs and hotels. Greg’s father Theo Karedis, a Financial Review Rich Lister, established his fortune through Theo’s Liquor, which he sold to Coles 20 years ago for $175 million.
The Alexandria Homemaker Centre is a two-level hub whose tenants include big brands such as The Good Guys, Spotlight, Forty Winks and Bing Lee.
But for Goodman, combined with its other holdings in the neighbourhood, the hub is shaping as the linchpin for a major industrial development in coming years. The latest transaction underscores the extent to which inner-city real estate is gaining more value for its potential within the logistics chain than as pure retail.
Led by Greg Goodman, ASX-listed Goodman has plenty of firepower to devote to development plays. In its third quarter update this week, the company upgraded its earnings forecast and detailed just how lowly leveraged it is, with gearing at 7.2 per cent and $2 billion in liquidity.
“At the moment we’re deploying and putting a lot of capital into our development workbook, and we’re doing that because the margins are very, very good and demand from customers is strong,” Mr Goodman said this week.
Mr Goodman also confirmed the shift toward more intense use of industrial real estate, noting that more companies were leaving secondary locations for centrally located, multi-storey buildings, with 60 per cent of work in progress for facilities of more than one floor.
Both Goodman and Arkadia declined to comment on the pending transaction.