ESR-REIT plans to buy five freehold logistics properties in Melbourne from Frasers Property for A$276.8 million ($247.9 million), says the REIT manager in a July 7 announcement.
The sum represents a 1.9% discount to the properties’ market valuation while the acquisition is expected to be accretive to the REIT’s distribution per unit (DPU) by 4.3% on a pro forma basis,
The five properties have a total gross lettable area (GLA) of 122,411 sq m. They are located within Melbourne’s western and south-eastern industrial and logistics precincts.
They are at 15 & 33 Archer Road, Truganina; 4-12 Doriemus Drive, Truganina; 64 West Park Drive, Derrimut; 39 Naxos Way, Keysborough; and 58-76 Naxos Way and 68 Atlantic Drive, also in Keysborough.
ESR-REIT says the properties are near key transport infrastructure, with access to major employment and distribution hubs.
As at June 26, the properties are valued at $283.7 million with a one-year rental guarantee of A$2.5 million for the property at 39 Naxos Way and $282.2 million without the rental guarantee.
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The properties have an average building age of 11 years, an occupancy rate of 90% and a weighted average lease expiry (WALE) of 3.2 years based on gross rental income (GRI) as at March 31.
“The proposed acquisitions mark an important step in the execution of ESR-REIT’s total return strategy and reflect our disciplined approach to capital recycling,” says Adrian Chui, CEO and executive director of the manager.
“Following the divestment of selected non-core and mature assets ahead of diminishing returns setting in, we are redeploying capital into five institutional-grade freehold logistics assets in Melbourne acquired at an attractive discount to valuation,” he adds.
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In addition to its being DPU-accretive, the acquisitions are expected to “provide embedded organic growth through positive rental reversions, supporting sustainable earnings growth and long-term value creation for unitholders”.
The manager says it intends to fund the total acquisition outlay of A$303 million with proceeds from the divestment of the eight industrial Singapore properties announced in December last year and debt financing. It does not intend to issue new units to fund the proposed acquisitions.
The proposed acquisitions are expected to be completed in 3Q2026, following approval from Australia’s Foreign Investment Review Board (FIRB).
In its separate announcement, Frasers Property says this deal is in line with the strategy to recycle capital and unlock value from its assets and optimise capital productivity.
Units in ESR-REIT closed 3 cents higher or 1.3% up at $2.34 on July 7.
Frasers Property shares closed at $1.09, down 0.91%.
