This article is from the Australian Property Journal archive
CHARTER Hall will tap investors to help fund its $1.25 billion last-minute Christmas shopping spree, with 225 BP-branded petrol stations and an Arnott’s manufacturing facility on the list.
They will be encouraged to show some festive spirit, as Charter Hall also upgraded its FY20 guidance for post-tax operating earnings per security growth up to 30%, from 18% to 20% over FY19, given recent acquisition activity and resultant funds under management growth beyond $38 billion.
Among the recently minted deals for the group are the $400 million purchase of the Jessie Street Centre in Parramatta in partnership with GIC, and The Glasshouse in Macquarie Park, Telstra’s Melbourne headquarters and a Bunnings Warehouse in Darwin for a combined $331.5 million.
Charter Hall will spend $840 million in a new managed partnership with a 49% interest in a $1.7 billion portfolio of convenience properties. The portfolio has a WALE of 20 years, with staggered lease expiries from 18 to 22 years and triple-net structure with annual CPI increases.
Also confirmed was the $398.9 million acquisition of the Arnott’s facility in Sydney’s western suburb of Huntingwood, with a 32-year triple net leaseback to the biscuit brand through its parent company KKR.
Momentum in the petrol station asset class is growing. Caltex has just netted $136 million from the sale of 25 sites across the country – of which 22 are going to Woolworths and Oliver Hume – representing the first tranche of 50 service stations the fuel giant has deemed more suitable for development and seeks to sell off.
BP has similarly sought to release capital via its property holdings. As companies navigate a harsh retail climate, innovative moves have been required to stay afloat. BP recently struck a partnership with David Jones to introduce premium food products into some stations, while Caltex launched its take away food concept The Foodary in 2017.
More recently, Caltex announced plans to spin off a portfolio of 250 freehold sites into a new service station REIT in 2020, and rejected an $8.6 billion takeover offer from Canadian convenience store operator Alimentation Couche-Tard.
JLL research last week showed sales in 2019 as of a few weeks ago had totalled $303 million across 61 transactions, although 60% of that volume had transacted in the four months since July. Investors have recently been offered a glut of petrol and convenience stations. Bill Withers recently sold a portfolio of 15 7-Eleven sites for about $78 million at a Burgess Rawson auction event.
The acquisition of the BP service stations will be made through a partnership managed by Charter Hall, and 50% owned by Charter Hall Long WALE REIT (CLW), 30% owned by Charter Hall Retail REIT, and 20% owned by Charter Hall.
CLW is undertaking an underwritten $350 million equity raising, which includes an accelerated non-renounceable entitlement offer and placement. Charter Hall Group intends to subscribe for its maximum entitlement as part of that ANREO offer which equates to approximately $20 million.
This CLW weighted average lease expiry will grow to 14.9 years with higher FY20 earnings per security growth of 5.2% over FY19. Charter Hall said the move is consistent with the CHC Property Investment portfolio strategy to optimise WALE, earnings growth and tenant customer quality with many of our customers being leaders in the industry or market segment.
Charter Hall Prime Industrial Fund (CPIF will take a 50% interest in the Arnott’s food production facility and distribution centre at 61 Huntingwood Dr, Huntingwood and the other 50% interest will be acquired by the CLW as a tenancy in common interest.
In addition to CPIF’s oversubscribed $725 million raising, yesterday’s announcement marks yet another capital raising by a listed property group ahead of the close at the of a year that has seen major players including Dexus, Mirvac, Cromwell, GPT all look to investors for additional firepower, joined this week by Centuria Metropolitan REIT.
Earlier this week, Centuria Industrial REIT snapped up two other Arnott’s biscuits facilities, in Brisbane and Adelaide, for a combined $236 million. A Virginia facility was picked up for $211.8 million, on an initial yield of 5.8% and with a 30 year lease, and in Adelaide’s Marleston for $24.4 million, at 7.4%, and is leased for 12 years.
On 16.4 hectares of land, the Huntingwood property measures about 59,000 sqm, including an automated high bay facility currently under construction. The facility generates the majority of Arnott’s products by volume.
KKR acquired Arnott’s earlier this year in a $3.2 billion mega deal and went about sizing up its facilities for divestment.
CPIF last month picked up the Viridian Glass national headquarters in Dandenong South for $100 million, in another of the larger industrial sale and leaseback transactions seen this year.
“We welcome the establishment of these significant tenant customer relationships with BP and Arnott’s. Our success in partnering with Global multi-national and Australian-based corporates in sale and leaseback activities continues to benefit our tenant customers while providing opportunities for our diverse range of investors and securityholders,” Charter Hall’s managing director and group chief executive officer, David Harrison said.
Sean Williams, Associate Analyst, Moody’s, said the investment house viewed the “high quality of the assets, long weighted average lease expiry of the portfolio and triple net leases as supportive of CQR’s rating, particularly with CQR’s strategy of recycling capital through the divestment of non-core assets”.
