Asia logistics real estate platform ESR announced on March 29 that it has acquired a parcel of land on Japan’s Tokyo Bay for development of a $1 billion warehouse facility.
The Warburg Pincus-backed developer specified that the $1 billion represents the amount that it expects to invest building the first phase of the ESR Yokohama Distribution centre, which it contends will be one of the largest master-planned logistics parks in Japan when completed.
The announcement of the Japanese mega-project comes less than one month after the Pan-Asian warehouse platform filed for a Hong Kong IPO that could be worth as much as $1.5 billion, according to sources familiar with the listing who spoke with Mingtiandi,
Sam Zell, US Pension Fund Backing Tokyo Project
The new facility will occupy a site in the southern part of the port city Yokohama about 45 kilometers from the Tokyo CBD, and will initially comprise two four-storey logistics facilities with a total gross floor area of 393,226 square meters (4.23 million square feet).
The Hong Kong-based warehouse builder cited research by CBRE which found, that at the end of the fourth quarter of 2018, the vacancy rate for logistics stock in Tokyo Bay stood at only 2.4 percent, with rents expected to rise over the course of 2019.
“Low vacancy and continued strong demand coupled with the constrained supply of premium space around Tokyo Bay makes this Yokohama site a rare opportunity,” Stuart Gibson and Charles de Portes, ESR co-CEO and President respectively, said in the statement.
The project, backed by ESR’s Redwood Japan Logistics Fund 2 and investment partners including real estate mogul Sam Zell’s Equity International and an unnamed US pension fund, intends to cater to distribution needs within Greater Tokyo, which has a population of over 37 million and is the world’s largest urban economic cluster, according to ESR.
Zell’s involvement in the new venture comes after the US private equity personality committed $205 million to ESR’s Japanese projects in 2016. Zell’s Equity International had established a strategic partnership with The Redwood Group in 2013. Shanghai-based e-Shang and The Redwood Group formed ESR, one of the region’s largest logistics players, when they merged in January 2016, in an event first reported by Mingtiandi.
ESR’s acquisition came two months after its announcement of a new joint venture with an unnamed sovereign wealth fund and France’s AXA Investment Managers to acquire core logistics properties in Japan.
Room to Expand Near Tokyo
The Yokohama site has a capacity to develop a buildable area of over 700,000 square meters, according to ESR, making it one of the largest multi-phased logistics parks currently under development in Japan in both size and value.
The Japanese logistics sector has been expanding at eight percent annually, according to figures cited by ESR from the Japan Logistics Institute.
In addition to its proximity to Tokyo’s urban core, the site is 3o kilometres away from Haneda International Airport, 40 kilometres from the Port of Tokyo container terminal and just 15 kilometres from Yokohama Port. A new highway system connecting both the Ken-O and Tomei expressways is scheduled for completion in 2020, further reducing travel time to the site.
IPO on the Way This Year
The logistics real estate platform has filed for an initial public offering in Hong Kong earlier this month. The stock market listing should bring in at least $1 billion, and could be worth as much as $1.5 billion, reported Mingtiandi.
The IPO for ESR, which grew from a 2016 merger between Shanghai-based e-Shang and Japan’s Redwood Group, is expected to be the biggest real estate stock debut on the Hong Kong exchange since Dalian Wanda’s $3.7 billion listing in 2014, according to Mingtiandi estimates.
Led by co-founders and co-CEOs Jeffrey Shen and Stuart Gibson, ESR has already built a portfolio of 5.7 million square meters of facilities across China, Japan, India, Singapore and Korea and has rapidly been establishing a presence in Australia.