GIC and ESR Cayman have formed an 80-20 joint venture to acquire a portfolio of industrial and logistics real estate assets in Australia for A$3.8 billion ($3.92 billion), in what has been described as the largest logistics property transaction ever Down Under.
Jeffrey Shen and Stuart Gibson, ESR co-founders and group Co-CEOs say in a statement that ESR is "extremely pleased" to deepen its partnership with GIC with this "momentous transaction".
"This tremendous expansion not only adds immediate scale to our presence in Australia and the region, but also extends our footprint and reaffirms our commitment to one of our highest conviction markets in Asia Pacific," state Shen and Gibson.
The seller is US asset manager Blackstone Group, confirming an earlier report by the Australia Financial Review.
The portfolio holds 45 industrial and logistics real estate assets in Australia, with an aggregate land area of 3.6 million square meters and building gross leasable area of 1.4 million square meters.
ESR Australia CEO Phil Pearce calls this a transformative deal that will give ESR’s Australia business with immediate scale, with its extremely well-located logistics assets enjoying robust demand due to sustained growth in e-commerce.
"The portfolio is land rich, with low site coverage of only 38%, providing plenty of opportunities for ESR to redevelop these assets over time," he adds.
According to ESR, the portfolio has an initial yield of 4.5% and a weighted average lease expiry of 6.9 years.
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ESR believes that the “blue chip” tenant pool will provide secure medium-long term income for the joint venture.
"Given the prime locations of the properties and low site cover within the portfolio, multiple near term and longer-term re-development opportunities exist," says ESR.
The portfolio was appraised at A$3.43 billion, and for the FY ended Dec 2019 and FY ended Dec 2020, generated earnings of A$281.5 million and A$294.3 million, respectively.
To sweeten the deal, the properties are sold on a 100% occupancy basis with two years of rental support being provided by Blackstone for any outstanding vacancies at the time of completion.
With this deal, ESR’s asset under management in Australia will increase to US$6 billion, and become the third-largest manager of logistics real estate in this market as measured by AUM and total area.
As part of the deal, ESR will be providing management services to the portfolio of properties, and thereby generating a bigger stream of recurring income, thereby positive for the portfolio in the long-term.
Specifically, the portfolio consists of eight assets in New South Wales with an aggregate land area of 360,812 square meters and gross leasable building area of 170,469 square meters;
20 assets in Victoria with an aggregate land area of 2,114,536 square meters and gross leasable building area of 827,888 square meters;
Three assets in Queensland with an aggregate land area of 131,020 square meters and a gross leasable building area of 51,578 square meters.
Nine assets in Western Australia with an aggregate land area of 589,089 square meters and gross leasable building area of 167,456 square meters; and
Five assets in South Australia with an aggregate land area of 405,830 square meters and gross leasable building area of 138,845 square meters.
