AMP Capital sold a logistics facility in Sydney to Lendlease’s investment platform for $ 130.1 million at a yield of 3.62%, a record result fueled by low interest rates and strong appetite institutional investors for industrial assets exposed to the boom in electronic commerce.
The Eastern Creek Warehouse is the national distribution center for clothing retailer Best & Less, owned by private equity firm Allegro Funds, which in an independent move withdrew a brand float proposal last Friday. popular.
It is also the final ownership to find a buyer in a portfolio of five assets, amounting to $ 750 million, which was gradually sold by AMP Capital as the real estate mandate it closed. managed for the European reinsurance giant Swiss Re.
The 35,000 square meter warehouse was acquired for Swiss Re’s tenure two years ago for $ 99.6 million from Steinhoff Asia Pacific, as the beleaguered retailer sold its real estate to consolidate its balance sheet.
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But it is the breathtaking return of 3.62%, considered the highest to date for an institutional-grade industrial asset, that is likely to attract the most attention in an already very real estate-loving market. logistics, as it overlaps the advantage of structural change dismantling traditional retail investment in favor of online shopping.
The scale of the transaction – this is NSW’s largest asset transaction to date this year – also indicates the extent of demand for these assets from fund managers, institutions and retailers. their financiers, given that the market has just absorbed the historic $ 3.8 billion. sale of Blackstone’s Milestone Logistics portfolio last month.
This was quickly followed by another industrial exit from Blackstone, the sale of its 90% stake in Fife’s industrial and logistics portfolio to PGIM Real Estate and Manulife for approximately $ 850 million. Both deals were done at 4.5 percent or less.
“The rise of e-commerce, combined with other favorable winds supporting the occupant market, has seen the industrial and logistics sector in Australia become increasingly institutionalized, with buyers drawn by strong lease terms and a stable revenue collection, ”said JLL’s head of financial markets. for industry and logistics in Australia, Tony Iuliano, who negotiated the recording contract with his colleague Roger Miller.
“We have also seen increasingly sophisticated sources of capital entering the market in recent years, including sovereign wealth funds and insurance groups, which were significant net buyers of Australian industrial and logistics assets in 2020. “
Clearly, the pandemic has accelerated the shift of consumers away from physical retail and e-commerce, thus increasing the demand for logistics space.
In addition, the disruption of global supply chains – which could ultimately threaten economic recovery with the rising cost of goods shipped – prompts local distributors to stock where they can, adding an additional premium to logistics space. .
Mr Miller pointed to the trend towards higher inventory levels and the relocation and near-market supply of manufactures as additional drivers of demand for industrial assets.
“The industrial sector is characterized by exceptionally strong real estate fundamentals, including limited speculative activity, strong demand for occupiers and a significant appetite for capital at a level never seen before in this country,” he said.
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