Singapore giants trade $277m Melbourne industrial portfolio
ESR has agreed to buy five Melbourne logistics assets from Frasers Property Industrial – a long-time co-investment partner.
For the Singapore listed ESR-REIT, the manager is outlaying $288.6 million – or $276.8m net – a 1.9 per cent discount to recent valuation for the properties in Derrimut, Keysborough and Truganina.
The blended initial yield is 5.5 per cent.
With 122,411 square metres, in buildings an average 11 years old, the portfolio is 90 per cent occupied with a 3.2 year weighted average lease expiry.
Major tenants include CEVA Logistics, Silk Logistics and Nick Scali.
The deal comes two years since ESR and Frasers, which is also based in Singapore, bought a 64.4 hectare Cranbourne West industrial site from Salta.
In 2019 the pair acquired the ex-Peters ice cream factory site in Mulgrave and pre-committed Nissan to an office now at an edge of the block.
Portfolio breakdown
The priciest of the five new ESR assets, 58-76 Naxos Way and 68 Atlantic Drive, in Keysborough, set it back $75.7 million, or $71.9m net, a 4.8 per cent discount to valuation.
Another property in the suburb, 39 Naxos Way, cost $52.3m or $49.8m net.
Only 46pc leased; FPI will provide a one year rental guarantee of c$2.5m with the amount to be deducted from the purchase price at settlement.
In the west, ESR is paying $64.6m (or $64.2m) net for 15 and 33 Archer Road, Truganina (pictured, top).
That price is 0.4pc below valuation.
Another asset in the suburb, 4-12 Doriemus Dve, occupied by CEVA, is costing $51.6m or $49.2m net (continues below).
The fifth property, 64 West Park Dve, Derrimut, is trading for $44.2m ($41.7m net).
Both 4-12 Doriemus Dve and 64 West Park Dve are selling for 0.1pc below their last valuations.
The portfolio’s first-year net property income is forecast at about $16m.
In a statement, ESR said it expects near-term rental growth saying values across the portfolio sit at between 12-17pc below market levels.
Existing leases contain annual fixed rental increases of between 3-3.5pc, they added.
Recycled capital
ESR said the acquisitions are expected to increase distributions about 4.3pc on a pro forma basis.
Settlement, subject to Foreign Investment Review Board approval, is expected this quarter.
The deals come after ESR-REIT shed about $490m of Singapore land-lease industrial assets – part of a broader portfolio reposition strategy.
Rather than issuing new equity, the trust will fund the acquisition using sale proceeds and debt.
Following these Singapore and Australian deals, freehold assets will form 23.5pc of the fund’s portfolio – up from 19.3pc.
Australia’s contribution to rental income will also increase from 12.7pc to 15.5pc.
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