ESR, ADIA Sell Stake in $2.2B Aussie Logistics Venture to Japanese, Malaysian Investors

ESR’s Australian business has landed the country’s largest logistics transaction this year with the industrial specialist agreeing to sell a stake in a A$3.2 billion ($2.2 billion) logistics portfolio held by a joint venture with the Abu Dhabi Investment Authority (ADIA) to a Japanese-managed vehicle and an unnamed Malaysian fund.

The Asian investors are acquiring an unspecified stake in a portfolio of 11 assets across Sydney, Melbourne, Brisbane and Perth, according to an announcement by Hankyu Hanshin Properties which manages the Japanese venture. Sources familiar with the transaction confirmed that Hankyu Hanshin, together with the Malaysian investor, are paying a combined A$536 million for their stake, with news of the deal first reported by The Australian.

The properties are from the Logos Australian Logistics Venture (LALV) venture established by Logos Property (now part of ESR) and ADIA a decade ago, with Hankyu Hanshin praising the quality of the assets in its statement.

“The property complex consists of 11 logistics properties (43 buildings) consisting of rental properties and newly developed properties. All of the properties are located in locations ideal for logistics in various cities in Australia, and have excellent specifications such as floor load and ceiling height,” Hankyu Hanshin said.

Stable Rental Demand

The portfolio includes four properties in Sydney, three assets each in Melbourne and Brisbane, and one in Perth, with the set of logistics estates spanning a combined leasable area of 860,000 square metres (9.3 million square feet).

With backing from shipping giant Mitsui OSK Lines and Osaka-based property services firm Kintetsu Real Estate, Hankyu Hanshin Properties is investing through a fund it established less than two months ago, and said it intends to boost the value of the portfolio.

“Hankyu Hanshin Properties Australia Pty Ltd (HHPAUS) will organise and manage the fund, thereby aiming to increase the value of the properties…and by providing investment management services for the fund, will also meet the needs of investors, Hankyu Hanshin said in the release.

Hankyu Hanshin, which said it will jointly carry out leasing and development of the properties alongside ESR. ESR declined to comment but acknowledged the transaction, and ADIA had not yet responded to Mingtiandi inquiries by the time of publication.

The acquisition is Hankyu Hanshin’s latest investment in Australia following its entry to the market through participation in a fund led by Japan’s Mitsubishi Estate and Sydney-based AsheMorgan, which in October 2023 acquired the 60 Margaret Street commercial tower in Sydney from Blackstone and Mirvac for A$777 million. The company said it plans to continue to expand in the Australian market.

Logos Assets in Play

The sale of the stake in LALV marks ESR’s second major Aussie logistics transaction involving a Japanese investor in two months after the industrial giant in August set up a JV with Mitsubishi Estate for a A$175 million industrial estate.

ESR in July acquired the remaining interest in Logos held by the developer’s founders, having concluded deals to acquire the 13.6 percent equity stake held by co-founders and co-CEOs Trent Iliffe and John Marsh along with former Southeast Asia head Stephen Hawkins.

Since the time of that buyout, market sources have confirmed that ESR is marketing some of Logos’ India assets and Iliffe is understood to be taking over some of his former company’s Vietnam and India properties under a new venture.

Established in late 2014 by ADIA and Aussie industrial developer Logos, LALV came under ESR management in early 2022 following the group’s $5.2 billion takeover of Singapore-based ARA Asset Management, which had acquired a majority stake in Logos in 2020.

ADIA made an additional equity commitment in March 2022 to LALV, which at the time consisted of nine properties with a total end value of A$3.7 billion, including a major stake in a site in Mascot, near Sydney Airport.

Logos had appointed investment bank Jarden and property consultancy Cushman & Wakefield to lead a marketing exercise for the LALV stake in March 2023 with that effort having concluded last year without a transaction being completed. ESR later went on to manage the eventual sale to the Hankyu Hanshin fund and its Malaysian co-investor independently.

Aussie Logistics Heats Up

Hankyu Hanshin ‘s acquisition comes as Australia saw A$2.6 billion of industrial transactions in the second quarter, marking the strongest three-month period for the sector since April through June 2022 and exceeding the ten-year quarterly average of A$1.7 billion, according to a July report from Cushman & Wakefield.

Average logistics vacancy nationwide in Australia rose to 1.9 percent during the first half of the year from the record low 0.6 percent a year earlier, but remaining below 2 percent in Sydney, Brisbane and Melbourne, according to a July report from CBRE.

In July, Goldman Sachs Asset Management acquired seven last-mile logistics properties across Australia for a reported A$200 million, while a JV of PGIM Real Estate and ASX-listed fund manager Elanor Investors Group agreed to buy a last-mile logistics site in a Melbourne suburb, also for a reported A$200 million.

Those deals came a month after a JV between an affiliate of Starwood Capital and Arrow Capital sold a portfolio of seven logistics assets near Sydney and Melbourne for A$166.8 million, while Blackstone in April acquired a south Sydney industrial complex from Charter Hall for A$55.75 million.