Centennial extends partnership with KKR for new and differentiated industrial & logistics fund

21 March 2022

Centennial Industrial & Logistics has once again expanded its footprint within the industrial & logistics real estate sector, following the establishment of a new industrial & logistics fund with a targeted portfolio size of $650 million.

The new fund, known as the Build 2 Core (B2C) Partnership Fund, is backed by KKR, one of the world’s leading investment firms, and continues a relationship that commenced when KKR partnered with Centennial on its earlier Industrial & Logistics Portfolio Fund 1 (CILP1).

The new B2C Partnership Fund will allow the partnership to execute a “differentiated” strategy that will develop and hold a range of warehouse and logistics properties. Three seed assets have already been secured on Australia’s eastern seaboard, including the $39-million Somerton Industrial Park in Victoria, the $30-million Geebung Industrial Park in Queensland, and the $13-million Stapylton Distribution Centre, also in Queensland. In total, the three assets have a combined existing gross lettable area (GLA) of nearly 38,000sqm and a holding income of $2.63 million allowed for staged development. Under Centennial’s investment strategy, which aims to develop these sites to create institutional-grade multi-asset estates, the three sites will be upgraded to an estimated GLA of close to 70,000sqm, with a future value of $201 million on completion.

According to Paul Ford, Centennial’s Executive Director and CEO Industrial & Logistics, there are a number of key drivers that have prompted the establishment of the new and differentiated fund.

“In setting up B2C, we have looked at the growth in e-commerce and related supply chain shifts to infill or last-mile location demand, increasing land constraints, above-trend occupier demand, building obsolescence and urban renewal,” he said.

“The strategy is quite different yet in many ways a natural extension to our existing niche, “mid-space” strategy on which we have executed and have a deep core capability, it is focused on a “niche and under-serviced” sector of the market which leverages our specialist national platform.”

“Overall, this expands Centennial’s national investment portfolio to more than 55 industrial and logistics assets in Queensland, New South Wales, South Australia and Victoria.”

Details on the Fund are outlined below.

Fund Overview

Responsible EntityCEN (I&L) Partnership Pty Ltd (ACN 655 272 969)
Fund ManagerCEN (I&L) B2C Management Pty Ltd (ACN 655 209 573)
Fund Size Target$50.5M (initial)
Fund OpenFebruary 2022
Fund Raising Close28 March 2022
Fund Term5 – 7 years (estimated)
Target ReturnIRR of 12 -14% p.a. over the life of the investment term
Investor TypeWholesale – $2500,000
Target Assets66-84 Brickyard Rd, Geebung QLD
95 Quinns Hill Rd East, Stapylton QLD
“Somerton I” 57-61 Freight Dr. Somerton VIC
“Somerton II” 83-89 Freight Dr, Somerton VIC

Fund overview 

The Fund provides a unique opportunity for investors to invest alongside global investment firm KKR & Co. (“KKR”) as the Strategic Investment Partner, which has a 71.2% investment in the portfolio. The Fund will hold a 17% investment with the balance being held by institutional investor Sabin Group (10.2%) as well as Centennial management (1.7%). This is the second industrial and logistics vehicle Centennial has established with KKR.

The Fund’s goal is to invest in the development of a diversified portfolio of core, mid-space industrial and logistics assets located in urban infill areas across Australian capital cities. The Fund’s key focus is a “build to core” strategy that targets opportunities to build and develop high quality, industrial and logistics estates that, upon completion, will be an attractive core industrial asset.

Fund Strategy

The Manager will manage both the Fund and the underlying B2C Fund. The Fund will look to acquire vacant or underutilised land that provide opportunities to develop core, multi-unit industrial and logistics estates catering for tenancies between 1,000sqm and 10,000sqm. Properties are expected to have acquisition values of at least $10M with end values of between $20M and $100M. Assets or land acquired will be located in Australian capital cities and must be appropriately zoned for the intended use. The Fund’s investment in Adelaide and Perth is limited to 15% of the portfolio value at any given time. If the Fund exceeds this limit by virtue of valuation movements, then no further acquisitions will be made in the relevant markets until the limit is maintained. The Manager is not required to sell assets to rebalance the portfolio.

During the initial investment phase, the Manager will also acquire a limited number of income producing industrial and logistics assets (such as the Somerton I and Somerton II assets in Victoria) to support the senior debt financing of the development portfolio. These assets are consistent with the overall strategy of creating a portfolio of core, infill industrial and logistics assets. Assets will be developed to a high standard with a focus on optimising capacity and efficiency, the ability to cater for multiple sources of automation, and environmentally sustainable design principles. The strategy involves a combination of pre-committed and uncommitted development to deliver product to the market and take advantage of above trend tenant demand.

Fund Fees

Centennial are entitled to receive fees in consideration for establishment and management of the Fund including;

  • Acquisition Fee up to of 2.00% of the Acquisition Price
  • Management Fees based on 0.70% of the Gross Asset Value (GAV) of the Fund
  • Development Management Fee: 5% of Total Project Costs up to $5.0M, and 4% of the Total Project Costs in excess of $5.0M.
  • Disposal Fee equal to 1.0% of the sale proceeds (in place of an agents selling fee)
  • A Performance Fee of 20% of the Sub Trusts outperformance above a 9% Equity RR up to an 18% Equity IRR then 40% of the outperformance of a Sub Trust over an Equity IRR of 18%

The above fees generally align with market practice, however we note that the Performance Fee is payable on a Sub Trust level meaning that if other assets perform poorly there is not claw back to Performance Fees paid on other assets.


The Manager does not intend to pay a distribution during the initial three years of the Fund, as the B2C Fund is acquiring and developing assets. After three years the Manager is targeting the Fund to deliver a distribution of 5% p.a. on the basis that it has established the portfolio with income producing assets.

Withdrawal / Liquidity

The Fund does not have a set liquidity event however the Manager, in consultation and with the approval of KKR as the Strategic Investor, will determine when to sell the assets. Investors should view the Fund as a Total Return style fund and consider an investment as being illiquid in nature. The Manager has also indicated that it will also facilitate the transfer of units in the Fund to provide liquidity, however this is not guaranteed.


The Fund strategy is not in line with our preferred investment strategy, however we recommend the Fund for further consideration by investors seeking exposure to the risk & returns for developing mid-space core industrial assets.

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