Warehouse giant wins capital backers for $3bn trust as sector makes recovery

Two Asian funds will pump $536m into a new club that will invest in a fund run by ESR in a sign that premium industrial real estate remains hot.

The ESR portfolio includes the Berrinba Logistics Estate in Queensland.

Big ticket industrial real estate deals are back on the agenda, with two Asian investors committing to take a slice of a $3.2bn prime logistics portfolio in the largest play this year.

The pair, Japan’s Hankyu Hanshin Properties Corp. and another fund, believed to be from Malaysia, will pour $536m into a new club that will own a slice of an 11-strong portfolio of warehouses, run by another Asian powerhouse, the ESR Group.

The industrial sector is a key indicator of economic health as demand from the large companies that occupy the facilities, which are mainly on the east coast, shows that they are committed to investing in their supply chains and that they have the confidence to expand.

Demand in some major markets has cooled back to more normal levels after surging during the pandemic. But striking such a large deal is a sign that global investors have confidence, and it is also a precursor to more investment in the still busy logistics sector.

The move by Osaka-based Hankyu Hanshin adds to the rise of Japanese investing in commercial real estate, which has touched almost all parts of the property industry.

The new investment club will effectively buy a stake in a portfolio of assets that are managed by ESR, with the transaction effectively seeing them come in alongside Middle Eastern sovereign fund the Abu Dhabi Investment Authority.

The ESR portfolio includes the Berrinba Logistics Estate in Queensland.

Japan’s Hankyu Hanshin Properties Corp, via its Australian unit, said it would invest in the properties in Sydney, Melbourne, Brisbane and Perth. The business will launch a new multi-investor fund which will acquire an interest in the 11 logistics estates that ESR Group manage, and they will look to boost the value of the portfolio.

The fund’s manager, Logos, kicked off a process to bring in investors last year but was later taken over by Asian warehousing giant ESR.

Its launch of the process, handled by Mitchell Schauer of investment bank Jarden and Tony Iuliano and Adrian Rowse of real estate agency Cushman & Wakefield, led a wave of proposed recapitalisations in logistics real estate with the offer of an interest in the portfolio.

But the process was drawn out as both interest rates were hiked, and the market adjusted to demand cooling back to more normal levels The deal has been struck as there is now more clarity about both bond rates, which are shifting downwards again, and the level of demand for top properties.

It is also a sign that big foreign investors are still keen on local industrial property, despite a number of attempts to recapitalise local portfolios running for extended periods. Both the scale of the industrial property transactions and the difficulties of drawing together global groups have played into delays.

But there are breakthroughs, including the investment arm of US bank Goldman Sachs investing in a Fife Capital-run vehicle that is looking to expand on the back of the e-commerce revolution.

By investing in industrial property, Hankyu Hanshin is showing that it believes the industrial sector can expand. The Japanese company has previously invested locally. It was among the Japanese firms that backed finance House AsheMorgan when it bought the office tower at 60 Margaret Street in Sydney.

For ESR, which inherited the management of the Logos platform, the deal is a boost not only to its funds management unit but also confirms its capacity to draw in fresh capital.

The next leg of industrial property transactions are expected to be priced off this deal as other players including local groups including Growthpoint Properties, Aliro Group and others seek out partners in industrial property.

Originally published as Warehouse giant wins capital backers for $3bn trust as sector makes recovery