ESR Australia today settled on a $3.8 billion purchase of 45 industrial investments – the Milestone collection – and a management business, from Blackstone.
The deal, agreed in April and reflecting a 4.5 per cent yield, is the highest price paid in one line for an Australian property portfolio.
The group is now the country’s third largest industrial land manager, behind Goodman and Charter Hall.
Last month, ESR secured two tenants – Food Packaging Australia and SPAR – to a combined 19,000 square metres at Brisbane’s Acacia Ridge Industrial Estate, a property it acquired last October, also from Blackstone.
The Milestone portfolio
ESR now manages assets valued at $8.1b.
The Milestone portfolio added 360 hectares of industrial product with 1.4 million sqm of gross lettable area – all up worth $3.4b (the associated management business accounted for the additional $400m outlay).
The majority of this real estate – c60pc – is in Melbourne’s west and south east, including former woolsheds at Tottenham.
About 15pc of the assets are in Perth, followed by Sydney (12pc).
Also with holdings in South Australia and Queensland, the portfolio’s Weighted Average Lease Expiry is 6.9 years.
Australia Post, Caterpillar, Daimler Benz, Emergent Cold (which occupies four facilities on 16 year leases), Mazda, Reece, Toll and Woolworths are amongst the biggest tenant clients.
ESR outbid Dexus, Mapletree and a LOGOS/Axa Investment Management partnership for the Milestone portfolio (story continues below).
Assets majority held by GIC
“Since the transaction, the continued growth and strength for demand for logistics assets nationally has been exponential,” chief executive officer Phil Pearce said.
“In recent months, there have been several assets transact at sub four per cent yields along the eastern seaboard, which provides further validation for the price paid for the [Milestone] portfolio and ESR’s view that the market would continue to be strong,” he added.
“Further, land prices around the country have continued to grow at accelerated rates, which will allow ESR to bring forward the redevelopment of several assets…further enhancing our value proposition.
“The underlying land value was a crucial part of our underwrite as we view the assets as very strategically located”.
ESR will hold the Milestone portfolio in a new vehicle 80pc owned by GIC.
Two other managed trusts – the ESR Australia Logistics Partnership and ESR Australia Development Partnership – are also majority controlled by the Singaporean sovereign wealth fund.
ESR’s development pipeline is worth $3.3b – up 33pc, or $900m, since the Milestone acquisition.
“Within the Milestone portfolio, ESR has identified at least 14 assets to be developed in the coming three to seven years,” Mr Pearce said.
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