Centennial chases partner on $450m last mile logistics portfolio as KKR exits

Centennial is looking for a fresh backer to recapitalise a $450m last mile logistics portfolio, which private equity house KKR is exiting after three years. Picture John Grainger

Property funds manager Centennial is looking for a fresh backer to recapitalise a $450m last mile logistics portfolio, which private equity house KKR is exiting after three years.

The groups have tapped CBRE to bring in one or two new institutions to back the portfolio of nearly 20 assets in eastern seaboard capital cities.

Centennial has carved out a name in last mile logistics assets by moving early to assemble often low value properties, mainly via off-market deals with private vendors, and then lifting them to institutional grade.

The portfolio was launched in the early stages of the pandemic, and Centennial has since overhauled many of the facilities that were acquired and put in national and multinational tenants.

The strategy was bolstered by the spike in e-commerce, which has held up after Covid-19 restrictions were eased. It is also benefiting from the wider range of tenants shifting into new last mile deliveries.

The portfolio differs from the large recapitalisation opportunities that have hit the market this year. These include two Logos portfolios, Mirvac setting up a partnership with ART, and Stockland seeking a $2bn industrial partnership.

Institutions are expected to be attracted to the portfolio due to Centennial’s focused management and the successful niche strategy.

CBRE’s Chris O’Brien and Stuart McCann are handling the process, but they and the parties declined to comment. The agency is looking for a new majority capital partner that would have a controlling stake, and big players said there was upside in the offer.

Centennial and KKR effectively amalgamated two high quality portfolios of assets focused on urban logistics and last mile logistics.

Despite its size, the strategy differs from the “larger box” outer ring road larger scale logistics facilities and focuses on inner-ring properties in land constrained markets. While they house smaller tenants from 1000- 10,000sq m, many are offshoots of national or international companies.

The portfolio is underpinned by about 80 per cent land value and has the ability to capture strong rental growth as it runs at more than 25 per cent below current market rents.

Centennial has a specialist Sydney, Melbourne and Brisbane team which has acquired nearly 80 assets in the niche area, working with KKR and other institutions and private clients.