Property funds splash half a billion on Bunnings and cold storage properties

Property funds splash half a billion on Bunnings and cold storage properties

More than $500 million worth of retail and industrial properties are set to change hands following separate announcements today from Charter Hall Group (ASX: CHC) and Centuria Industrial REIT (ASX: CIP).

Six Bunnings Warehouse assets in prime metropolitan markets have been sold for $353 million to the Long WALE Hardware Partnership (LWHP), a group that includes Charter Hall, the Victorian Funds Management Corporation (VFMC) and Telstra Super.

Meanwhile, Centuria has entered contracts to acquire three cold storage properties on the fringes of major capital cities for $171 million, supported by a planned $125 million capital raising at a 2.9 per cent discount to the last traded price.

Around 85 per cent of the Bunnings transaction relates to properties in Sydney, Melbourne and Brisbane, after the off-market deal was introduced to Charter Hall by Sam Hatcher of JLL.

"We are proud to further expand our strong relationship with Wesfarmers and Bunnings Group," Charter Hall managing director and group CEO David Harrison said.

"Across the Charter Hall platform we now have in excess of $2.4 billion invested in 59 Bunnings stores, 50 of which are located in metropolitan locations.

"This transaction represents our seventh Bunnings portfolio acquired since 2006 when we first recognised the strength of the Bunnings business, the relatively low rents per square metre of lettable area and the large prime sites Bunnings typically occupy."

LWHP fund manager Ben Ellis confirmed the transaction extended the Bunnings relationship and off-market transaction record for the partnership, which has generated an internal rate of return (IRR) above 15 per cent since inception.

The largest of the three Centuria deals announced today was at $73.1 million for a 25,418sqm cold storage property in the outer Sydney suburb on Girraween. The other purchases in Derrimut, VIC and Parkinson, QLD are worth $49 million each.

"The east coast, cold storage portfolio acquisition leverages a key growth thematic for CIP in the non-discretionary, food and pharmaceutical distribution and refrigerated logistics industries," says CIP fund manager Jesse Curtis.

"These industries are experiencing strong tailwinds underpinned by a rapid increase in online food sales creating favourable supply and demand dynamics.

"The three assets are strategically located in core industrial markets of Sydney, Melbourne and Brisbane, with excellent connectivity to distribution networks. They provide secure income streams supported by leading national and international operators."

Once completed, these transactions will lift CIP's portfolio to 59 assets worth $2.3billion with occupancy of 96.8 per cent and a 9.7-year weighted average lease expiry (WALE).

These three assets are expected to settle by December 2020.

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