ESR and China Merchants Capital create $350 million Australian logistics investment arm

ESR Cayman Limited (ESR) has announced a deal with China Merchants Capital Investments Co Ltd (CMC) to seed a $350 million real estate platform focused on developing and owning Australian logistics investments.

The new mandate will be known as the ESR Australia Logistics Trust (EALT).

Hong Kong-headquartered ESR will half-fund EALT, using its existing balance sheet.

ESR recently sold 11 wholly owned assets for a total of $175 million including a $19.75 million Dingley Village business park we reported about four weeks ago.

Last month, we reported ESR sold a Dingley Village business park on 3.9 hectares (highlighted) to Sydney-based HB+B Property for $19.75 million.

Also last month it sold the unbuilt Mulgrave office set to be car making giant Nissan’s next headquarters – an asset (artist’s impression, bottom) it will co-develop with Frasers Property Australia.

ESR said its recent capital raising recycle strategy (which does not include proceeds derived from the Nissan office sale) was implemented so that it could realise capital for future projects.

ESR will continue to manage the EALT properties.

EALT aims to continues ESR’s “impressive” growth trajectory

“The establishment of this mandate is the first step in a strategy of releasing capital from our balance sheet to fund and accelerate our future developments,” ESR chief executive officer Phil Pearce, said.

“ESR has been on an impressive growth trajectory in the 12 months since entering the Australian market,” the executive added. “We have a robust development pipeline here in Australia, with a number of other opportunities we are pursuing.”

“Partnerships like the one with China Merchants Capital means we can continue to improve on the substantial growth we have already achieved in this market while delivering strong results for our investors.”

Vincent Yu, the managing director and chief executive officer of CMC added that “as last-mile delivery becomes increasingly important for supply chain efficiency, we believe occupier demand for industrial and logistics properties will continue to grow and drive up rents, especially in well-located industrial areas with supply constraint.”

Jeffrey Shen and Stuart Gibson, co-founders and group co-chief executive officers of ESR said the establishment of EALT “demonstrates the strength of our integrated business model using a capital-efficient strategy to source and recycle capital.”

“It also reflects our confidence in the long-term potential of the Australian logistics and industrial real estate sector. We will continue to leverage the strong track record of our funds management platform, together with our expertise in asset and property management, to capitalise on the opportunities in Australia and the broader APAC region.”

ESR – the largest Asia Pacific focused logistics real estate platform measured by gross floor area and the value of directly owned via investment vehicles – US$20.2 billion – made its trading debut on the Main Board of the Stock Exchange of Hong Kong on November 1.

Some of its clients include APG, SK Holdings, Goldman Sachs and Ping An.

Last year it announced a deal with Allianz Real Estate to invest in Indian logistics property investments.

Its portfolio also includes properties in China, Japan, Singapore and South Korea.

In Australia, it recently announced land acquisitions for its A$1.8 billion development pipeline.

CMC is seven years old – one younger than ESR.

Touted as an alternative investment and asset management platform, CMC controls global real estate assets worth US$39 billion for institutional investors.

Nissan’s new Mu;grave headquarters is due for completion in May 2020.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco
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