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US funds management giant Morgan Stanley Real Estate has ramped up investment in the Australian logistics sector by partnering with Centuria Industrial REIT (ASX: CIP) to acquire a half share of eight properties worth $362 million.
Under the agreement, Morgan Stanley Real Estate will snare a 50 per cent stake in the industrial properties located in NSW, Victoria and Queensland through a new joint venture vehicle, the Centuria Prime Logistics Partnership.
Centuria will use the $181 million proceeds from the sale to reduce debt while maintaining its exposure to the high performing assets.
“The formation of this partnership combined with portfolio valuations demonstrate the resilience of CIP’s portfolio and the continued demand for high quality industrial assets within urban infill markets in which CIP operates,” says Centuria’s head of industrial Jesse Curtis.
“This strategic partnership further strengthens CIP’s balance sheet by reducing gearing and interest costs.
“Occupier demand for industrial property remains strong with low vacancy and limited supply continuing to drive rental growth across industrial markets.”
The sale to Morgan Stanley was struck on a yield of 4.7 per cent.
Curtis says while capitalisation rates have widened, this has been ‘substantially offset by the value of CIP’s leasing success and growth in market rent with the portfolio value reducing modestly’.
The $181 million top-up comes on the heels of settlement earlier this month by Centuria of the $34.5 million sale of 30 Clay Place in Eastern Creek in a separate deal.
The assets secured by Morgan Stanley are 8 Lexington Drive, Bella Vista, 29 Glendenning Road, Glendenning, and 52-74 Quarry Road, Erskine Park, in NSW; 95-105 South Gippsland Hwy, Dandenong South, 40 Scanlan Drive, Epping, and 69 Studley Court, Derrimut, in Victoria; and 42 Hoepner Road and 1 Ashburn Road, both in Bundamba, Queensland.
Meanwhile, Centuria has seen an expansion of 47 basis points in the capitalisation of its portfolio to 4.66 per cent following a 1.9 per cent fall in valuations in the first half of FY23.
Centuria has reaffirmed its FY23 guidance of a 16c per unit distribution.
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