ESR-AXA JV Buys Amazon Japan Warehouse for $368M

A joint venture between warehouse developer and fund manager ESR and AXA Investment Managers has acquired a logistics facility near Tokyo for approximately JPY 39 billion ($368 million), just seven months after Amazon leased nearly half of the property.

The ESR-AXA vehicle has completed the purchase of the 151,501 square metre (1.63 million square foot) ESR Kuki DC from ESR-managed vehicle Redwood Japan Logistics Fund II (RJLF II) and co-investors in a deal which works out to $2,429 per square metre of built area.

The transaction, which is the biggest single asset acquisition to date by the ESR-AXA joint venture, adds to the portfolio of stabilised properties acquired by the ESR-AXA vehicle since it was established in 2018, and underlines the importance of e-commerce in driving logistics real estate deals in Asia Pacific.

Joint Venture Expands Core Portfolio

“This acquisition is a significant addition to our existing Japanese logistics portfolio, which is well positioned to benefit from the solid fundamentals underpinning the continued growth of the third party logistics market,” Laurent Jacquemin, Head of Asia-Pacific at AXA IM – Real Assets said in a statement.

Jacquemin, whose company entered the joint venture together with an unnamed sovereign wealth fund, went on to add, “The demand for modern logistics space in this market is likely to remain strong due to tight supply and we are confident that this, coupled with the continued growth of e-commerce, will enable us to deliver secure income returns over the long term for our clients, alongside our joint venture partner.”

This latest acquisition adds to the six assets already acquired by the ESR-AXA joint venture, with the Paris-based firm indicating that the investment vehicle will continue to look for both stabilised assets and development opportunities in Japan’s gateway cities.

The JV invested a reported $1 billion to buy its initial set of properties located near Tokyo and Osaka, with all six said to be less than three years old at the time.

Attracting Amazon

Located in Saitama prefecture, ESR Kuki is just under fifty kilometres (30 miles) north of central Tokyo and was completed in September 2018. The four-storey structure comes equipped with solar panels, a children’s day care centre, a staff lounge and other amenities for onsite workers, which ESR credits with having helped to attract tenants such as Amazon.

“ESR Kuki DC is a state-of-the-art development from our successful partnership with RJLF II capital partners and other co-investors,” ESR co-founders and co-CEOs Jeffrey Shen and Stuart Gibson said in a statement. They added that, “This highly successful transaction demonstrates the attractiveness and resilience of the logistics asset class against the backdrop of a challenging macroeconomic environment, reassuring our strong conviction in the APAC logistics sector.”

Amazon leased 72,392 square metres of the project in January, in a deal which local media indicated runs through 2024. That transaction earlier this year followed a 2018 commitment by the US online titan to lease ESR’s entire 64,000 square metre Ibaraki facility in Greater Tokyo, according to the Hong Kong-listed developer’s 2019 IPO prospectus.

Local Japanese media also reported in 2017 that Amazon took a long term lease on all of ESR’s 177,560 square metre Fujiidera Distribution Centre in Osaka after its completion in 2017.

Fund Investors Cash Out

ESR had developed the Tokyo-area facility under its Redwood Japan Logistics Fund II, a $575 million vehicle backed by Allianz Group, which put in $185 million and an unnamed Southeast Asian pension fund, which invested $200 million.

Also piling into the vehicle were the State Oil Fund of Azerbaijan (SOFAZ), a fund managed by Aviva Investors, and an unidentified German pension fund advised by Mercer, which had also invested in ESR’s predecessor fund RJLF1. With sidecar commitments, ESR raised a total of $1.2 billion in the initiative.