ESR closes out industrial fund with $160m spending spree
ESR Australia has swooped on two land rich industrial portfolios, closing out its Logistics Platform II (EALP II) fund after 14 months.
In the biggest deal, worth $97 million, the manager has picked up the so called Harmony collection – with three investments including a landmark 4.88 hectare business park in Melbourne’s Laverton North (pictured, top).
That asset alone, 63-69 Pipe Road, set the buyer back $57.4m – more than twice the ($25.2m) price Harmony Investments paid in 2018.
The other properties are 1425 Boundary Rd, Wacol, in Brisbane, which spreads 1.36ha, and 178 Railway Parade, Bassendean, Perth (3.04ha).
Dawkins Occhiuto’s Chris Jones was the agent.
Brisbane portfolio
Meanwhile, ESR has paid Direct Commercial Property $61.6m – reflecting a 5.75 per cent yield – for five Brisbane investments with medium-term development upside (the blended Weighted Average Lease Expiry is 2.7 years).
Three of the properties, covering a combined 5.3ha, are in Hemmant.
Combined with a fourth at Eagle Farm, 90pc of this collection by area, is in the city’s revered Trade Coast Precinct.
The final asset in the so called Brisbane portoflio is also at Wacol.
CBRE’s Jack Pershouse represented DCP (story continues below).
Best days ahead
Industrial yields have compressed in recent years, with investors confident about major rental reversion prospects, especially in capital-city markets, and within that, Sydney and Brisbane (spreading to the Gold Coast).
As well, multi-level warehousing, possibly over basement car parking, is finding favour, which is ballooning land values, particularly in premium infill locations such as Sydney’s Alexandria, where Goodman recently purchased a homemaker centre to repurpose as a distribution centre, and nearby Mascot where LOGOS and AustralianSuper last October paid Qantas $802m – $200m over expectation – for a collection of properties all up covering 13.8ha.
Melbourne’s Fishermans Bend is another area mooted longer-term for significant industrial product of this type.
Following its $158.6m outlay, ESR has spent all the $600m committed to EALP II, one of several GIC backed funds; the trust WALE is 3.4 years.
The manager estimates the fund’s gross built-out value will grow to $1.3 billion.
“ESR Australia will continue to scale up our national presence in premium industrial locations,” the group’s chief executive officer, Phil Pearce, said following the Harmony and Brisbane portfolio purchases.
“Our acquisition strategy continues to focus on identifying quality, well-connected areas with low supply, where there is a demand for world-class industrial space or customers prioritising amenities and location,” he added.
“The supply shortage and increasing demand in the industrial markets along with the eastern seaboard are resulting in high unexpected growth in the Queensland region, and we’re delighted to expand our footprint to capitalise on the broad opportunities up north,” according to the executive. “With site coverage of only 33.8pc across the portfolio, ample opportunity exists to extract further value through the development or redevelopment of key sites”.
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