Brookfield backs Centennial for $700m last-mile logistics fund

Australian property investment manager Centennial has secured backing from Canadian multinational Brookfield to close a $700 million fund for last-mile logistics assets, targeting both new acquisitions and redevelopments of existing properties already held by the Sydney-headquartered group.

Founded by Jonathan Wolf and Lyle Hammerschlag in 2011, Centennial has grown its industrial and logistics (I&L) assets under management (AUM) Australia-wide to 63 properties worth more than $1.1 billion in total, as well as a development pipeline of around $360 million.

Centennial expects the industrial and logistics Enhanced Value Partnership (EVP) with Brookfield will enable it to grow AUM to approximately $3 billion.

The Australian company is putting four seed assets into the new fund, recapitalising three distribution centres in Brisbane and Melbourne as well as an industrial park in Brisbane’s tightly held Australia TradeCoast precinct.

Centennial notes all seed assets are fully leased and provide opportunities to capture rental growth through redevelopment and active management, with up to $60 million to be invested by Centennial principals and existing private client investors.

The EVP is expected to not only recapitalise existing assets but will also provide additional capital to add exposure to the Australian infill logistics sector, which the group notes is experiencing some of the lowest vacancy rates in the world. 

The fund will typically target estates and buildings with tenancies between 1,000sqm to 10,000sqm within established inner ring and land-constrained markets that are typically valued $10-$75 million upon stabilisation and/or redevelopment.

Centennial’s executive director and CEO for industrial and 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 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," Ford says.

"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.

"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 market."

The partnership with a Brookfield Asset Management private real estate fund represents the third global partnership within the I&L sector since the specialist platform was established in 2019, the other two being the Build 2 Core Fund with KKR and the joint venture with Apollo Global Management-owned MaxCap to build a $90 million I&L park at Willawong in Brisbane’s inner south.

Marcus Day, managing director of Brookfield’s real estate secondaries business, says the company is pleased to close this general partner-led secondary transaction with Centennial, allowing 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," Day says.

"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 adds 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 currently has 83 assets in total and more than $1.8 billion in AUM across the I&L, commercial, retail, luxury residential and social infrastructure property sectors, and has a team of 35 professionals based in Sydney, Melbourne, Brisbane and Adelaide.