M&G Takes Majority Ownership of ESR Greater Tokyo Warehouse for $267M

M&G Real Estate Asia has acquired an additional one-third interest in an ESR Greater Tokyo distribution centre for JPY 34 billion ($267 million), giving the Asian division of the British asset manager a majority stake in one of ESR’s largest Japanese warehouses.

Acting on behalf of its Asia core property strategy, M&G now owns 58.3 percent of the ESR Ichikawa Distribution Centre in Chiba prefecture, according to an announcement on Wednesday, after first acquiring a 25 percent stake in the 201,111 square metre (2.16 million square foot) facility in May 2021.

“Acquiring a majority stake at an attractive going-in yield is an important milestone for M&G as we double down on our conviction and commitment to Japan’s logistics sector, which we believe will continue to play a pivotal role in the country’s economy as demand for high quality assets remains robust,” Richard van den Berg, fund manager of M&G’s Asia core property strategy, said in the statement.

The acquisition deepens the UK-based asset manager’s ties with ESR in Asia’s second-largest economy, with the announcement coming shortly after M&G agreed to invest up to $350 million in a Japan logistics development partnership with the APAC industrial specialist last August.

M&G Secures Bigger Slice

The deal values the four-storey facility at nearly $802 million, or around 7.4 percent less in US dollar terms than the valuation when M&G purchased its initial stake in the facility from ESR-managed Redwood Japan Logistics Fund II for $217 million in 2021.

By area, the M&G is paying just less than $3,988 per square metre for the property, which incorporates a green wall, rooftop solar and other sustainable features. The mega-shed will now rank as the largest logistics asset in M&G’s Asia core property strategy.

Currently fully occupied, the distribution centre is situated in Ichikawa City in western Chiba Prefecture, which M&G describes as an attractive location for e-commerce firms and third-party logistics providers given its 20 kilometre (12.4 mile) distance from central Tokyo. Completed in 2019, the building is one of ESR’s largest operational facilities in the Greater Tokyo area.

The property has received an S rating on Japan’s CASBEE scale for sustainable buildings, as well as having received a Chairman’s Award from the country’s Organisation for Landscape and Urban Green Infrastructure for its sustainability features.

“Ichikawa Distribution Centre with its high ESG credentials is well-positioned to deliver stable and long-term value, backed by the strong fundamentals of the Japanese market,” added van den Berg.

Mingtiandi reached out to M&G and ESR but both companies declined to disclose the identity of the vendor in the transaction.

In addition to investing in the Ichikawa Distribution Centre, M&G in August 2021 also paid JPY 10 billion to buy a 40 percent slice of ESR’s Yatomi Distribution Centre in Nagoya on behalf of its Asia Property Fund.

Long-Time Partners

This latest warehouse investment strengthens the partnership between M&G and ESR just five months after the two announced a new strategy that will boost their portfolio of Japanese logistics assets to over $1 billion in gross asset value.

While M&G is chasing steady income from stabilised ESR assets in Japan, such as the Ichikawa Distribution Centre, the asset manager is also getting some exposure to higher returns from early-stage deals through its up to $350 million investment last year in the Japan development partnership with ESR.

That venture seeks to build a portfolio of Japanese logistics assets with more than $1 billion in gross asset value, and kicked off with the development of the Nagoya Minami 2 Distribution Centre in the city of Nagoya. M&G, which is investing in the development venture through its M&G Asia Property Fund, holds a majority stake in that project, which is slated for completion in October of this year.

ESR has over $8.3 billion in assets under management in Japan to date. In line with its active expansion, the Hong Kong-listed giant in mid-2022 finished construction of the first phase of its $2.5 billion Yokohama Sachiura Logistics Park with the second phase targeted for completion this month.