Asian giant ESR doubles down with new Australian logistics partnerships

Asian investors are ploughing $600m into core assets around the country.

ESR Australia chief executive Philip Pearce. Picture: James Croucher

Asian logistics giant ESR has strengthened its ties with Singaporean sovereign fund GIC, with the pair expanding their logistics strategy by making a $600m commitment to ESR Australia Logistics Partnership II.

The new partnership will target core-plus assets around the country and builds on their successful first partnership, which is nearly fully invested, as well as the $3.8bn Milestone portfolio that ESR bought with the backing of GIC this year.

The company’s run of deal-making continues with British funds manager M&G Real Estate Asia separately tipping in $200m to the ESR Australia Development Partnership. The Singaporean fund will commit $480m to EALP II, which is an extension of its first successful EALP. With the initial $600m equity commitment to EALP I near fully used, ESR and GIC set up EALP II with the fresh funds.

EALP I was launched with a seed portfolio valued of $715m in May and has been growing by buying properties and developing. It will grow to a portfolio with a forecast end value of about $1.6bn.

The fund holds 33 income-producing assets in strategic locations, including The Iconic’s fulfilment centre in Yenorra and Bringelly Road Business Hub and developments like Clayton Business Hub and Sherbrooke Industrial Estate in Willawong. All up, the fund’s assets account for over 500,000sq m of space, with about 200,000sq m of development.

“Following the successful deployment of the initial equity committed to EALP and the continued positive outlook for the logistics sector in Australia, we felt confident to commit an additional $600m to the core plus strategy via the launch of EALP II,” ESR Australia chief executive Phil Pearce said.

Fund manager M&G’s $200m backing of the EADP also signals its confidence in the area. Following M&G’s commitment ESR and GIC will hold 40 per cent each and M&G 20 per cent. Launched last year with $1bn of equity commitments, EADP is a develop-to-hold logistics strategy.

EADP was seeded with two western Sydney projects, Horsley Logistics Park and Leppington Industrial Estate. It has since acquired Acacia Ridge Business Park in Queensland along with a 79ha site in Cranbourne, Victoria. ESR has also won several precommitments from groups such as UPS, PACT, and SPAR.

EADP currently has $270m assets under management, with a further $500m of equity ready to deploy. Its current pipeline of 81,000sq m of developable land has an anticipated end value of $1.1bn.

“We are pleased to have M&G on board as a partner in EADP. Their $200m commitment further demonstrates ESR Australia’s ability to attract new capital, backed by an ever-growing track record of successful development projects in the local market,” Mr Pearce said.

“Through the sustained review of core funds, paired with the delivery of strong performing development sites and recurring earnings, ESR Australia is well-positioned to forge greater collaboration with capital partners to achieve our mandate of sustained growth,” Mr Pearce said.

M&G Real Estate Asia interim chief executive Jingdong Lai said the logistics sector was a “high conviction theme” for the firm’s real estate portfolios, and Australia was a core market for the group in the Asia-Pacific.