ESR seeds office mandate with two wholly owned business parks worth $138 million

Part of the Macquarie Park business park.

ESR Cayman Limited will seed an office focused mandate using two wholly owned Sydney business parks, picked up as part of its $723 million takeover of Propertylink in April.

The ESR Office Partnership IV (EOP IV), worth $138 million, includes:

  • 15 Talavera Road, Macquarie Park (pictured, right) – which contains 12,630 square metres of lettable area and a weighted average lease expiry (WALE) of 2.6 years, and
  • 18-20 Orion Road, Lane Cove (pictured, top). This 9,751 sqm complex with a nine storey office and 342 basement car parks has a 3.1 year WALE.

Hong Kong based ESR invests heavily in industrial real estate, globally.

ESR Australia chief executive officer Philip Pearce.

That said, last week it spent $24 million on a 2.25 hectare Mulgrave business park with seven offices, containing a total lettable area of 12,157 sqm.

Of EOP IV, ESR said it has introduced a number of investors into the mandate.

It intends to retain an approximate 11 per cent stake.

“This is a continuation of an existing strategy, providing investors with exposure to core-plus business park assets in Sydney and non-core plus industrial assets across the east coast of Australia,” ESE chief executive officer, Philip Pearce, said.

“We’re pleased to launch this mandate which satisfies demand from investors for more exposure to business park assets while releasing capital for us to pursue development opportunities.

“The transfer of the wholly-owned assets to the mandate is a part of ESR’s asset recycling strategy to efficiently deploy capital for growth acceleration.

“We see business parks as complementary to our core strategy of logistics and industrial property, and we have some good commercial assets, such as those seeding EOP IV, in our portfolio,” Mr Pearce said.

News of EOP IV comes a month after ESR unveiled the $350 million ESR Australia Logistics Trust (EALT), co-established with China Merchants Capital investment Co Ltd.

ESR seeded EALT with 11 wholly owned assets, worth $175 million including, a $19.75 million Dingley Village business park it only bought in October.

Low vacancy, supply, driving ESR to Australian offices

Low vacancy rates and an under-supply of offices in Australia, particularly in Sydney and Melbourne, have driven rental growth in the office market, making this an appealing sector for investors, ESR co-founders Jeffrey Shen and Stuart Gibson said.

“Australia is an important part of our APAC growth strategy.

“EOP IV will provide investors with a further opportunity to benefit from ESR’s ability to create value through active asset management, including targeted capital expenditure and asset re positioning programs, leasing, and enhancement of asset sustainability.

“We believe this new mandate will further bolster our footprint expansion in Australia.”

Aerial view of the 3.9 hectare Dingley business park ESR acquired in October – and in November, announced would part-seed the ESR Australia Logistics Trust (EALT).

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Marc Pallisco

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

Marc Pallisco