German retailer Aldi is set to enter a $700 million sale and leaseback of a number of its logistic centres in order to capitalise on the boom in industrial property deals as demand continues to outweigh availability of quality stock.
The initial four Aldi warehouses, located along the east coast, will be sold and likely leased back in order to place proceeds back into its front line supermarket operations.
Aldi has enlisted real estate firm JLL to sell the logistics centres which are expected to reach a combined valuation of $700 million and generate $30 million in annual income.
Aldi has now built a network of 554 stores across the country after entering the Australian market in 2001, taking on local giants Coles and Woolworths with its low cost, private label model.
The German giant has seen its revenue grow by 12 per cent over the last five years capturing a 10.6 per cent market share.
The move by Aldi comes as strong demand for logistics space, due to the growth of e-commerce and online retailing along with global bond rates remaining low, continues to push would be investors chasing higher risk-adjusted returns as land values continue to surge.
JLL is predicting another year of continued strong growth for Australia’s industrial investment market after identifying $30 billion of capital wanting to deploy into industrial and logistics assets, reveals its latest Industrial Investments Outlook Review.
“We expect corporate sale and leaseback to be a significant driver in 2020 which will help corporates reinvest their capital back into their operating streams,” JLL head of capital markets Tony Iuliano said.
“We will also see an increase in corporate activity to help unlock lazy balance sheets which will, in turn, create investment opportunities on a sale and leaseback, such as the recent sale of Arnott’s and Viridian Glass.”
JLL estimates for the industrial investable universe show that the market continues to grow each year.
The current capital stock by value is estimated at $88.2 billion, or 55.2 million square metres of gross lettable area. This is estimated to reach $114 billion in value by 2024.
The Urban Developer approached Aldi and JLL for comment, but both declined to comment further.
Aldi's logistics play follows the withdrawal of fellow German hypermarket Kaufland last month, backtracking on plans outlaid in 2017 for an “ambitious Australian investment and development program”.
The future of Kaufland’s existing Australian investments, which include almost $300 million worth of sites slated for stores and distribution centres, remains up in the air.