KKR’s Arnott’s property sell-off nearly complete

US private equity powerhouse KKR is close to offloading the final element of the $800m Arnott’s property portfolio.

Centuria Capital CEO John McBain and CEO, unlisted property funds, Jason Huljich at the Centuria offices in North Sydney on Tuesday. Picture: Hollie Adams

US private equity powerhouse KKR is close to offloading the final element of the $800m Arnott’s property portfolio it put on the block in the wake of it offloading two key facilities to Centuria Capital for $236m.

Those deals saw property in Queensland and SA sold to Centuria’s listed industrial property trust.

The remaining facility in Huntingwood, NSW, is the major prize. Worth about $550m, the asset is believed to be in the crosshairs of suitors including Charter Hall.

That listed funds company has assembled an industrial property empire worth more than $7bn and its platform has close ties with both food manufacturers and supermarkets.

The groups were tight-lipped about further deals on Wednesday with the focus on the Centuria transaction.

The property funds manager is finishing the year in striking fashion. On Tuesday its office trust raised capital to back the purchase of a $256m Canberra complex, and the latest buy takes the overall funds empire, run by John McBain and Jason Huljich, to about $7.3bn.

The Arnott’s portfolio was put on the block after KKR bought the Tim Tam maker from food giant Campbell’s Soup as part of a $US2.2bn ($3.2bn) deal in August.

KKR then offered the property portfolio via investment bank UBS and real estate agency CBRE.

The Centuria Industrial REIT said on Wednesday it had struck the sale and leaseback deals with Arnott’s and launched a $154m placement at an issue price of $3.41 per unit. The raising was handled by Moelis, UBS and JPMorgan.

The trust also revalued nine of its existing 46 properties, resulting in an increase of $19m or 9.5 per cent on prior valuations.

The fund also reaffirmed its fiscal 2020 funds from operations and distribution per security ­guidance.

The properties are at 46 Robinson Road East, Virginia, in Queensland, and at 23-41 Galway Ave, Marleston, in SA. The Queensland property is valued at $211.8m and the SA asset at $24.4m.

Centuria’s head of funds management, Ross Lees, said the acquisition of the two high-quality industrial assets materially increased the trust’s portfolio weighted average leave expiry and overall scale.

The fund’s portfolio value will increase to more than $1.5bn, locking in its position as Australia’s largest pure-play industrial REIT and increasing its near-term prospects for inclusion in the S&P/ASX200 index.

The properties are fully leased to Arnott’s, the iconic Australian brand that sold to the US private equity company this year.

The company dominates the manufacture and supply of Australian biscuits and the properties contain significant “mission critical” infrastructure which is core to the tenants’ ongoing operations.