Charter Hall in hot form with $270m cold storage play

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CHARTER Hall’s wholesale industrial and logistics fund has acquired a portfolio of 25 cold storage and food distribution centres in a $270 million sale and leaseback deal with PFD Food Services, slimming down PFD’s buyout offer from Woolworths that has rattled the food supplier industry.

The two-part $552 million deal would have seen Woolworths acquire a 65% majority stake in PFD – the privately-owned food service distributor – from the Smith family for $302 million, and PFD’s then-26 distribution centre network for $249 million.

Instead, Charter Hall’s $6 billion CPIF has swooped on 25 centres in an off-market transaction. The Australian Competition and Consumer Commission’s decision on the Woolworths purchase is still pending.

It will pay $269.4 million for the portfolio, which has an average 13.8-year leaseback to PFD with annual rent reviews of 2.8%. CPIF has a 10.7-year weighted average lease expiry.

Total site area of the PFD portfolio is nearly 293,000 sqm with more than 82,300 sqm of gross lettable area and low overall site coverage ratio of 28%, providing CPIF with future expansion capability.

A majority of the income – 55% – of the nationwide portfolio is derived from Victoria, followed by Queensland (23%) and South Australia (10%), and 90% by value is located in metropolitan industrial precincts.

Charter Hall has been a major player in the market rush for industrial and logistics assets, having now acquired more than $2.5 billion in industrial and logistics facilities so far in the financial year, and $6.3 billion in the past three years. Most recently, its Direct Industrial Fund No. 4 snapped up a pair of Patties Foods sites Victoria for $141 million.

Its total industrial portfolio now stands at $12.7 billion with a $2.3 billion development pipeline.

“This acquisition continues our momentum in securing sale and leaseback portfolios from leading corporates and demonstrates the group’s ability to close large transactions, swiftly and efficiently within the desired timeframes of vendors,” Charter Hall’s managing director and group CEO, David Harrison said.

“The properties were acquired off-market and is a testament to our ability to work with corporates to develop tailored deal structures that support their broader investment strategies and release capital back into their business.”

CPIF fund manager, Richard Mason, said 54% of CPIF’s portfolio is now leased to the food logistics sector, with tenants including Coles, Woolworths, Metcash, ALDI, Coca-Cola Amatil, Lion Dairy and Arnotts.

Supermarkets battle for logistics

PFD Food Services founder, Rick Smith said, “We are pleased to partner with such an experienced owner of warehouse and logistics property. It provides a key new relationship to facilitate the further growth that we are enthusiastically planning for the business.”

Amid the battle for logistics supremacy in the supermarket sector, Woolworths made the offer to take a controlling stake in the PFD business last year, sparking united backlash from multiple industry groups and the ACCC review over concerns of market dominance.

In a submission to the ACCC, Australia’s small business ombudsman wrote that allowing the deal to go ahead would be a “real kick in the guts” for smaller food distributors.

Woolworths and PFD told the ACCC they were prepared to enter into enforceable undertakings in a bid to secure the deal, including keeping supplier and customer information confidential and introduce a charter that PFD would operate under in all dealings with suppliers.

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