AXA IM Alts, an alternative asset arm of France’s AXA Investment Managers, announced on Tuesday that it has begun construction of a four-storey logistics facility near Nagoya, Japan.
Working together with Warburg Pincus-backed developer and fund manager ESR, which will be responsible for developing a 155,000 square metre (1.7 million square foot) facility with the potential for reaping rental returns as the COVID-19 crisis continues to boost demand for logistics space.
“This is a rare opportunity to acquire a well-located site suitable for the development of a Grade A logistics facility, an asset class that has proved resilient against the backdrop of the global pandemic,” said Laurent Jacquemin, head of Asia Pacific at AXA IM Alts.
The partners expect to invest a total of JPY 27 billion ($260 million) in the project by the time of its planned completion in April 2022, with ESR having first unveiled plans to build the Yatomi Kisosaki distribution centre in Japan’s fourth-largest city in February of last year.
“ESR Yatomi Kisosaki DC is set to become a landmark project in Greater Nagoya, reflecting ESR’s commitment to providing best-in-class properties in support of businesses to grow and optimise their operations,” ESR’s co-founder and co-CEO Stuart Gibson said in February 2020 just before the purchase of the 79,025 square metres (850,618 square feet) in Kisosaki town of Japan’s Mie prefecture.
Hong Kong-based ESR will be responsible for development of the project and will also support the leasing programme and management of the completed asset, with marketing for the leasing already underway. With flexible unit sizes starting at 5,000 square metres, the double-ramped facility will be suitable for a diverse range of occupiers, AXA IM said.
The site 380 kilometres west of Tokyo and 30 kilometres from Nagoya’s city centre was purchased from the Mie prefectural government and benefits from access to Mie and Aichi Prefectural Roads in Kisosaki, as well as being aligned with a future extension of the Isewangan Expressway.
Nagoya, on the main island of Honshu, is the capital of Aichi prefecture and is one of Japan’s major ports. With over two million inhabitants, and forming a key hub on the western side of the island, ESR already has the 35,227 square metre Nagoyaminami Distribution Centre and three more facilities in the Greater Nagoya area,
The ground-breaking for the Nagoya project further expands AXA IM Alts’ roughly $3.5 billion global logistics portfolio and confirms the ambitions of the company’s Real Assets platform in Japan’s logistics sector in Japan, while further cementing its relationship with ESR.
Taking the Alternate Route in Japan
The ESR-AXA development project in Nagoya comes two years after the pair of companies announced that they had formed a Japanese core logistics joint venture together with an unnamed sovereign wealth fund. That JV immediately took over an existing ESR portfolio of of six Japanese logistics assets for over JPY 100 billion.
In its largest single-asset acquisition, the joint venture in August 2020 bought a logistics facility near Tokyo for JPY 39 billion, just seven months after e-commerce titan Amazon had leased nearly half the property.
The ESR-AXA vehicle completed the purchase of the 151,501 square metre ESR Kuki DC from ESR-managed vehicle Redwood Japan Logistics Fund II and co-investors in a deal that worked out to $2,429 per square metre of built area.
Last month, AXA IM announced the addition of its first data centre to its growing portfolio of Japanese assets with the purchase of a 20,000 square metre server facility in Tokyo for JPY 22 billion.
And AXA IM’s interest in Japanese assets extends beyond alternatives: it picked up a 160-room hotel project in Hiroshima for JPY 4.6 billion from GreenOak Investment Management and budget hotel chain Red Planet in 2019. Then last July it acquired a pair of residential assets in Nagoya, purchasing a three-building residential complex for JPY 20 billion and a 10-storey apartment tower for JPY 36.5 billion.