Last week, Charter Hall Retail Management, as responsible entity of Charter Hall Retail REIT (ASX: CQR) announced that CQR has purchased a $111.8 million or 52% interest in a $215 million high quality purpose-built distribution facility fully leased to Coles Group Limited for 14.5 years. Charter Hall’s strategy of investing in retail convenience based assets and retail logistics assets is strong as they benefit from the strong supermarket trade – unaffected by the COVID-19 pandemic. This is an extension of their relationship with Coles follows the announcements of sites in Sydney and Melbourne only months ago.
The distribution facility is located in the Adelaide’s prime industrial precinct of Edinburgh Park, South Australia, approximately 25km from Adelaide CBD and is utilised by Coles as its sole distribution centre to service all of its retail stores in South Australia and the Northern Territory.
This Adelaide site, has a remaining lease term with Coles of 14.5 years plus multiple options and fixed annual reviews of 2.75% providing accretion to the portfolio WALE and security of rental growth. The CQR retail portfolio now boasts exposure to 276 convenience, convenience-plus and long WALE retail properties.
The property has been owned by a Charter Hall partnership between three funds. The major 52% ownership fund reached the end of its defined investment term, providing a mutually beneficial opportunity for the CDC syndicate investors to exit, whilst providing CQR a resilient exposure to logistics, leased to one of its major convenience retail customers in Coles. The remaining 48% interest continues to be held by two Charter Hall Direct managed funds.
CQR’s equity investment post settlement for the 52% interest is approximately $60 million, given there is existing asset level debt. This $60 million utilises a small part of the $465 million of liquidity CQR has available as at 30 June 2020, which has further increased following the divestment of Pemulwuy Market Place, NSW and West Ryde Market Place, NSW announced on 3 July 2020, which were 50% owned by CQR.
West Ryde Marketplace, NSW
Charter Hall funds has also acquired an industrial investment in south-west Sydney. Charter Hall Prime Industrial Fund (CPIF) and another Charter Hall managed global institutional partnership have each acquired a 50% tenants in common title in a fully leased freehold industrial investment with a site area of 30.6 hectares, for a total consideration of $207 million reflecting an initial yield of 4.76%.
The property is situated at Culverston Road, Minto in south-west Sydney. The property is fully leased to four key automotive logistics tenants being Mazda, CEVA, PrixCar and Dial A Tow with an average lease expiry or WALE of 4.2 years.
The property has been acquired from the ASX listed Qube (ASX:QUB) and is subject to Foreign Investment Review Board approval.
The site has a State Significant Development Approval (SSDA) for up to 112,000m2 of warehouse development and approval for a rail siding on the site which provides connectivity to the Southern Sydney Freight Line which runs parallel to the eastern boundary enabling the development of an intermodal rail terminal.
Charter Hall Industrial & Logistics CEO, Richard Stacker, said “The property presents a unique opportunity to acquire a rare 30.6 hectare benched, serviced and zoned industrial development site in a core Sydney industrial precinct, with a staggered lease profile which provides holding income and enables a potential stage build out into a key logistics and intermodal facility.”
The property consists of 30.6 hectares of premium industrial assets in south-west Sydney
“The construction of Sydney’s second international airport at Badgerys Creek, major Federal and State Government infrastructure spending in Western Sydney and the streamlining of supply chains continues to drive the demand for well-located logistics facilities in Western Sydney.”
Minto is well located with excellent access to the Sydney orbital network and key freight corridors, including the Southern Sydney Freight Line, the M5 Motorway, M7 Motorway and Hume Highway.
Charter Hall CIO, Sean McMahon, said “The acquisition of the Minto property further upweights the Group’s $10 billion plus logistics portfolio to Sydney and extends existing tenant relationships with Mazda, CEVA and PrixCar. Both CPIF and the institutional partnership have core and develop to core strategies, with this site providing short and longer-term develop to core opportunities with a spread of lease expires.”
Charter Hall Group MD and CEO, David Harrison, commented “We are extremely pleased to consummate this transaction with Qube. It further highlights our capacity to deliver transactions within timeframes expected of vendors.”
“This acquisition, combined with recently announced logistics transactions, grows our Industrial and Logistics portfolio by $1 billion since the start of June, further extending our strategy of becoming a leading player in the Australian industrial market” said Harrison.
