Centennial closes $700m Australian last mile logistics fund in partnership with Brookfield

18 May 2023

National property fund manager Centennial continues to draw top tier global backers to its capital partnerships, with a Brookfield Asset Management private real estate fund the latest to partner with one of the country’s leaders in the mid-space, urban logistics sector.

EVP which has a niche ‘mid space’ strategy represents the group’s third global partnership within the industrial and logistics sectors since the specialist platform was established in 2019.

Brookfield’s real estate secondaries business has partnered with Centennial in their new $700m ‘Enhanced Value Partnership’ (EVP). The EVP recapitalises existing assets owned by Centennial and provides additional capital to continue to add exposure to the Australian infill logistics sector, which is experiencing some of the lowest vacancy rates in the world. Up to $60m will be invested by Centennial principals and its existing private client investors.

Centennial has contributed four seed assets to the new Fund, recapitalising three distribution centres in Brisbane and Melbourne and an industrial park in Brisbane’s tightly held Australia TradeCoast precinct. The seed assets are fully leased with a combined gross lettable area of 48,400sq m, and provide opportunities to capture rental growth through redevelopment and active management.

Centennial’s Executive Director and CEO, Industrial & Logistics Paul Ford, said the partnership’s strategy is based on selecting niche, mid-sized or underperforming assets within urban, supply constrained markets that are generally overlooked by institutional investors due to scale requirements and management intensity.

The new EVP raising will typically target estates and buildings comprising tenancies between 1,000sq m to 10,000sq m within established inner ring and land constrained markets that are typically valued between $10 to $75m upon stabilisation and or redevelopment.

“The partnership has been created to capitalise on continued tailwinds for the sector such as the continued growth in e-commerce, improvement in customer service models and material levels of existing building obsolesce.”

“Underscoring the strong fundamentals for the logistics sector is that Australia has the lowest vacancy rate in the world at just 0.6 per cent,” Mr Ford said. “When you add factors such as Australia’s population being expected to grow by 4.2 million by 2032, e-commerce penetration levels and delivery models well below global peers and severe supply constraints, we only see continued outperformance for true last-mile, inner ring warehousing and logistics markets.”

Marcus Day, Managing Director of Brookfield’s real estate secondaries business said the company was pleased to close this GP-led secondary transaction with Centennial which enables Brookfield to gain additional exposure to Australia’s dynamic last-mile logistics sector.

“Our partnership with Centennial is an exciting opportunity to recapitalise an existing high-quality logistics portfolio and pursue attractive urban infill acquisitions in the strongest industrial markets in the country. This transaction highlights the flexibility of our real estate secondaries and sponsor solutions strategy,” Mr Day said.

“Across our real estate secondaries platform, we have executed similar strategies in North America and the UK and so we are pleased to be partnering with Centennial in these tightly held Australian east coast markets. We expect the next few years to provide attractive opportunities in the logistics sector for well capitalised investors.”

Centennial Group CEO, Adrian Taylor said it was important to find a high calibre partner who equally understood the opportunity the current market provided as we move through the cycle’s next phase. “The partnership with Brookfield, one of the world’s largest alternative asset managers, allows Centennial to invest the EVP in around 24 months while also maintaining a pragmatic approach to selecting only high quality assets that complement its long-held investment objectives.

Centennial’s current I&L assets under management number 63 properties throughout Australia, valued in excess of $1.1 billion and a development pipeline of ~$360m. 

The addition of the new EVP will increase Centennial’s national investment portfolio capacity enabling it to grow its assets under management to around to $3.0 billion.