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The Charter Hall managed Charter Hall Prime Industrial Fund (CPIF) has acquired a 50% interest in the Arnott’s food production facility and distribution centre at 61 Huntingwood Drive, Huntingwood on a sale and leaseback for $198.9 million. The other 50% interest will be acquired by the ASX listed Charter Hall Long WALE REIT (CLW) as a tenancy in common interest. The weighted average lease expiry (WALE) of 32 years and un-capped CPI plus 0.5% rent reviews provides an attractive long term investment with inflation protection.
The property comprises Arnott’s premier production site, generating the majority of Arnott’s products by volume and incorporates a modern high quality food processing facility that contains a bulk materials receiving area, a large oven hall, chocolate room, packaging facilities and offices. The property has a site area of 16.4 hectares and approximately 59,000 sqm of GLA, including an automated high bay facility currently under construction.
Charter Hall CIO, Sean McMahon, commented, “This Arnott’s $397.8 million transaction continues our momentum with long WALE acquisitions and demonstrates the Group’s capacity to combine funds to close large sale and leaseback transactions, quickly and efficiently within the desired timeframes of vendors”.
Charter Hall Industrial & Logistics CEO, Richard Stacker, added “We are delighted to welcome Arnott’s as a tenant customer of Charter Hall. Arnott’s is the market leader in Australian biscuits, with a portfolio of iconic products that can be found in 95% of Australian households commanding about 61% share of the Australian biscuit market.”
“CPIF and CLW’s acquisition at $397.8 million (100% interest) is one of the largest individual industrial asset sales recorded in Australia” said Mr Stacker.
Arnott’s has signed a 32 year triple net lease with multiple 10 year options. Post the acquisition, CPIF’s weighted average lease expiry (WALE) increases from 9.8 years to 10.7 years, underpinning the resilience of CPIF’s income stream.
The property is strategically located in the core Huntingwood industrial precinct approximately 35 kilometres west of the Sydney CBD. The junction of the M4 and M7 motorways is approximately 3.5 kilometres to the west of the site giving excellent access to the Sydney Orbital Network.
CPIF Fund Manager, Richard Mason, said “The transaction provides a unique opportunity to secure a well located, major food production facility and distribution centre in the tightly held Sydney market. The acquisition is consistent with CPIF’s strategy to acquire core industrial and logistics properties close to major transport infrastructure, leased to major corporate customers on long-term leases.”
Following the acquisition of the property, CPIF’s weighting to the strongly performing Sydney industrial market increases from 32.1% to 35.4%, and Arnott’s becomes one of largest tenant customers in CPIF’s portfolio along with Woolworths, Coles, Coca Cola and Metcash reflecting the resilient food and beverage customer base, with triple net leases in the portfolio increasing from 20% to 23%.
CPIF’s $725 million capital raising, which closed significantly oversubscribed earlier this year, has given the Fund the capacity to fund its share of the Arnott’s property, the $100 million acquisition of Viridian Glass facility in Dandenong last month and a growing pre-leased development program expected to grow CPIF’s portfolio toward $7 billion.
The Fund offers investors an attractive 5 year forecast return, underpinned by a high quality portfolio comprising 63 properties, with a weighted average lease expiry of 10.7 years, strong weighted average annual rental reviews of 3.0% and resilient tenant covenants with 95% leased to government, publicly listed or nationally/globally recognised tenants.