M&G Pays $91M for 40% Stake in ESR Warehouse Near Nagoya Port

The Asian division of UK-based M&G Real Estate has acquired a 40 percent stake in warehouse specialist ESR’s Yatomi Distribution Centre for JPY 10 billion ($91 million), valuing the property in Japan’s Nagoya area at $227.5 million.

M&G bought the stake from ESR-managed Redwood Japan Logistics Fund II and Redwood Investor Kawajima Ltd, which are partners in the Singapore-domiciled joint venture that owns the three-year-old logistics facility, Hong Kong-listed ESR said Tuesday in a press release.

The deal for a significant slice of the four-storey warehouse in Yatomi City, about 6 kilometres (3.7 miles) from Nagoya port on central Honshu Island’s Pacific coast, marks M&G’s second investment in an ESR asset this year, after the British firm in April paid $217 million for a 25 percent stake in ESR’s Ichikawa Distribution Centre near Tokyo.

ESR co-CEO Stuart Gibson said the latest transaction provided a continuing validation of the company’s model of moving recently completed developments to new vehicles and investment joint ventures that provide long-term value through asset management initiatives.

ESG Credentials

ESR Yatomi DC provides 95,290 square metres (1,025,693 square feet) of total floor space and has received an A rating under Japan’s CASBEE certification for sustainable buildings and a LEED Gold ranking from the US Green Building Council.

Integrated into the design of the facility, which is fully leased to six tenants, is an array of rooftop solar panels, and the property also incorporates worker-friendly elements such as a day care centre and a staff lounge for tenant employees.

M&G, which made its investment on behalf of the M&G Asia Property Fund, paid $2,387 per square metre for its stake in the facility outside of Japan’s fourth-largest city, compared with the $4,306 per square metre it forked out four months ago for its share of ESR Ichikawa DC, which at 205,213 square metres is ESR’s largest operating warehouse in Japan.

Investor demand for logistics properties near Japan’s key cities remains resilient with the growth of e-commerce, said Richard van den Berg, the fund manager of M&G Asia Property Fund, the London-listed firm’s core real estate strategy in the region.

“Asian logistics has long been identified as a key investment theme for our fund and we are looking forward to further JV-type investment opportunities with ESR across the region as we increase logistics exposure to our higher target weighting,” van den Berg said.

Staying Big in Japan

ESR, the largest APAC-focused logistics real estate platform by gross floor area and by value of assets owned, manages $7.9 billion worth of logistics facilities in Japan.

Fresh off a $675 million upsize of its Japan logistics development fund with Dutch pension fund manager APG, ESR already commands the largest development pipeline in Greater Tokyo and Greater Osaka.

The group, which began life in Japan as Redwood before a 2016 merger with Shanghai-based e-Shang, has started construction of the second phase at ESR Yokohama Sachiura Logistics Park with over 195,000 square metres, to be completed in early 2023. The development, at roughly 800,000 square metres over four phases, is to be the largest logistics park in the country when fully developed.

ESR last week reported 39 percent earnings growth and a 37 percent jump in assets under management in the first half of 2021 compared with the year-earlier period, ahead of a planned buyout of Singapore’s ARA Asset Management.