Allianz, Charter Hall see competitive advantage in bidding amid covid-19

In bidding on an Australian logistics portfolio, the partners faced fewer competitors in the market as smaller players were unable to close deals quickly.

Allianz Real Estate, the real estate investment management arm of German insurer Allianz, has partnered with Sydney-headquartered investment manager Charter Hall to complete the biggest Australian logistics portfolio transaction in 2020 to date.

Despite closing during the pandemic, the A$648 million ($435 million; €400 million) deal wrapped up “very quickly” in less than four months, according to a source close to the situation. The source told PERE that the portfolio was first marketed in February and 10 bidders participated in the first round of bidding that closed at the end of April. With a loan-to-value ratio of 50 percent, Allianz and Charter Hall are understood to have secured a five-year loan from bank syndications. They will acquire the portfolio via a 50:50 joint venture, according to a statement.

The transaction was a sale and leaseback with global supermarket operator ALDI involving seven-year lease covenants. The portfolio encompasses four distribution centers in Sydney, Victoria and Brisbane.

David Harrison, chief executive officer of Charter Hall, told PERE that his firm won the bid because it was able to assure the vendor that it could complete the transaction in a short timeframe. “We have a very big competitive advantage in securing debt efficiently in this period because of our strong institutional reputation and diverse range of relationships with the banks. But I don’t think it’s easy for everyone,” Harrison explained.

Although the demand for prime logistics assets in Australia continues to be high, Harrison believed the firm has seen “less legitimate competition in the market that is capable of closing deals quickly due to the disruption caused by the pandemic.”

Rush Desai, chief executive officer of Asia-Pacific at Allianz Real Estate, speaking on conducting transactions at the moment, told PERE that “in a normal market situation, there would have been more bidders pursuing quality assets. But because of covid-19, there are fewer bidders and that gives buyers an inherent advantage on accessing assets at a reasonable pricing.”

Tony Iuliano, head of industrial capital markets & logistics at JLL Australia, told PERE that while there are fewer competitors in the Australian market overall, the portfolio still traded at market price because demand for logistics assets remains healthy. He added that although some players have dropped out of bidding on deals, he has also seen more capital returning to the market over the past four weeks to look for assets with stabilized, secure cashflow.

“The issue is the availability of stock, it is going to be very competitive for core products and I think there will be some further yield compression in the next 12 months,” Iuliano explained. He thinks it is very difficult to find “anything around $500 million or above” in the Australian market. This deal is the seventh-largest industrial transaction in the country since 2015, with two transactions priced above $500 million.

For this particular transaction, it is understood that Charter Hall was responsible for sourcing and completing on-the-ground due diligence, as Allianz faced travel restrictions due to the pandemic. Allianz has been a long-time investor in Charter Hall and it is also one of the top three investors in the firm’s A$6 billion Charter Hall Prime Industrial Fund.