ESR Buys Western Sydney Logistics Complex From M&G for $71M

ESR has acquired a western Sydney logistics complex from M&G Real Estate for A$107 million ($70.8 million) as the APAC industrial specialist continues to bolster its Australian portfolio this year.

ESR picked up the two-building facility at Erskine Park industrial estate on behalf of its core-plus ESR Australia Logistics Partnership III with Singapore sovereign fund GIC, a representative confirmed to Mingtiandi on Thursday. The site at 57-65 Templar Road features 30,114 square metres (324,144 square feet) of fully leased space with a weighted average lease expiry of 2.2 years.

Despite a challenging market with high interest rates, the purchase shows that opportunities exist in the current environment for the right assets, said ESR Australia CEO Phil Pearce.

“We are active in the market,” Pearce told Mingtiandi. “With a relatively short WALE, the Erskine Park acquisition provides the opportunity to benefit from rents reverting to market levels. We are confident that we will be able to get some good rental reversion as the leases come up.”

Dry Powder Deployment

Mingtiandi reported last year that ESR had raised A$600 million ($410 million) for its third core-plus logistics fund focused on the Australian market, with financial support once again provided by longtime partner GIC.

The Erskine Park buy adds to a series of Aussie acquisitions by Hong Kong-listed ESR in 2023, including the purchase of a development site near the future Western Sydney airport for A$70 million in a deal announced in September.

With 4.1 million square metres of warehouse space already developed in the country, ESR aims to build 82,000 square metres of new logistics capacity on the plot on Martins Road in the Badgerys Creek area, with an eye to the airport’s planned opening in 2026.

In June, ESR announced the A$143 million acquisition of the Allnex coatings factory in Sydney’s Botany Bay area on behalf of the ESR Australia Development Partnership II with GIC. The partners plan to invest at least A$443 million to develop a multi-storey logistics facility on the site.

The A$540 million first closing of EADP II last year gave ESR firepower for the Allnex buy. The fund is a follow-up to the A$1 billion EADP I launched with GIC in 2020, with both partnerships focused on developing premium, sustainable industrial estates across Sydney, Melbourne and Brisbane.

News of the Botany Bay deal came just six weeks after ESR announced a A$420 million joint venture with local logistics provider Toll Group to build a new distribution centre at the Westlink Industry Park near Sydney. The property is being developed for the 2021-vintage ESR Australia Logistics Partnership II with GIC.

Cashing Out at Erskine Park

M&G’s A$107 million disposal of the Erskine Park facility is capturing some value after the fund manager bought the logistics asset eight years ago for a reported A$50 million from Australia’s Dexus Property Group.

The London-based firm’s other APAC logistics deals this year include the purchase of four car showrooms in Singapore from auto distributor Jardine Cycle & Carriage in a transaction that closed in February. The properties changed hands through sale-and-leaseback arrangements worth S$333 million (then $248 million), marking the city-state’s largest industrial deal in nearly four years.

In January, M&G’s Asia core property strategy acquired an additional one-third interest in the ESR Ichikawa Distribution Centre in Japan’s Chiba prefecture for JPY 34 billion (then $267 million).