Manulife IM Buys Sydney Logistics Park From KKR, Centennial for $35M

Australian warehouses continue to be a top target for institutional investors with Manulife Investment Management announcing on Monday that it has acquired a logistics park in suburban Sydney.

The wealth management unit of Canada’s largest insurer purchased 243 Forrester Road in North St Marys, also known as Central West Distribution Centre, from a Centennial Property Group fund backed by private equity giant KKR for A$56 million ($35.4 million), according to market sources who spoke with Mingtiandi, with Manulife IM aligning the purchase with its belief in the logistics sector.

“The Australia industrial market is one of our high-conviction areas within the region, driven by its favorable fundamentals and significant growth potential,” said Kenny Lam, chief investment officer and head of transactions for the Asia Pacific unit of Manulife IM’s real estate equity unit. “We are continuously seeking attractive investment opportunities to enhance our portfolio in this sector and other asset classes with promising fundamentals.”

The deal extends a string of major logistics investments in Australia this year by global investors, including commitments by KKR, M&G, PGIM Real Estate and the Ontario Teachers’ Pension Plan. Cushman & Wakefield research predicts that investment in Australia’s industrial real estate sector could reach A$10 billion this year as yields average 5.85 percent nationwide.

Western Sydney Hub

Manulife IM agreed to purchase the two-building property in January with the price reflecting an initial yield of 5.00 percent, according to brokerage data. The facility spans 14,980 square metres (161,244 square feet) of gross lettable area on a 31,860 square metre site which puts the deal at A$3,738 per square metre of GLA.

With hardware retailer Mitre 10 having taken up the last 4,114 square metres in the facility in August last year under a seven year deal, according to a statement by Colliers, 243 Forrester Road is now fully let with a weighted average time to lease expiry (WALE) of 5.1 years and is located near the St Marys intermodal, Great Western Highway, Mamre Road, M4 and M7 Motorways in western Sydney. Other tenants in the facility include label printer and print manager Pegasus Media & Logistics.

243 Forrester Road is located just over 14 kilometres (8.7 miles) north of Amazon’s western Sydney fulfilment centre and 27 kilometres north of the future Western Sydney International Airport, which is expected to open late next year. Colliers is understood to have acted on behalf of Centennial in the disposal.

The Centennial fund had purchased a logistics facility on the Forrester Road site in 2022, adding a second building to the site and expanding the existing facility with the goal of achieving an A$65 million valuation, according to local press reports citing sources at Centennial. Representatives of the Australian investment manager had yet to reply to inquiries from Mingtiandi by the time of publication and KKR declined to comment.

Going Direct Down Under

Manulife IM hailed the logistics deal as its first direct real estate investment in Australia, with the property to be managed by its in-house asset management team as the company expands its presence in the market. In 2021, Manulife teamed with PGIM Real Estate and Fife Capital to acquire a 90 percent stake in a 20-asset Australian logistics portfolio from Blackstone for A$850 million.

“Alongside this acquisition, we are establishing a new office in Sydney to bolster our regional and local investment and asset management expertise,” Lam said in the statement, with the company in March having hired former Proprium Capital Partners executive Jake Hobbin to serve as a director in its Aussie outpost.

Invested on behalf of its parent company, Manulife Financial Corporation, the transaction puts more than half of Manulife IM’s Asia Pacific real estate portfolio under its direct management.

Aussie Deals Stack Up

Manulife IM announced its Sydney deal less than two weeks after China’s JD Property entered the Australian market by agreeing to buy a Brisbane industrial estate from an ESR vehicle for A$240 million.

JD’s deal for the Wacol Logistics Hub followed Brookfield Asset Management’s late February announcement that it had sold a western Sydney logistics estate to a Ontario Teachers’ Pension Plan and Korea Investment Corporation fund managed by local industrial specialist Gateway Capital for A$330 million.

During the same week that Brookfield revealed its Sydney sale, fund managers KKR, M&G Real Estate and PGIM Real Estate all announced Australian logistics investments.

KKR agreed to take a 70 percent stake in an open-ended, core-plus partnership with Stockland seeded with an A$388 million portfolio, with the local fund manager retaining a 30 percent share. M&G also teamed up with Stockland with the UK asset manager opting for a 50:50 open-ended partnership seeded with a logistics park in New South Wales at an initial gross asset value of A$415 million for the portfolio.

Stockland also played a role in PGIM’s February commitment, selling a Queensland industrial estate to a joint venture between the investment management unit of Prudential and Australia’s  KM Property Funds for A$207.5 million.

In a report issued earlier this year Cushman & Wakefield attributed investor interest in Australian logistics to underlying demand for space which has helped investors boost returns.

“Australia maintains a very tight vacancy rate of 2.5 percent and the market is still seeing solid rental growth, including double digit growth in some sub markets,” Tony Iuliano, international director and head of logistics and industrial for Australia at Cushman & Wakefield told Mingtiandi in a February interview.