Warburg Pincus-Backed ESR Launches A$1B Aussie Logistics JV with GIC

ESR has announced the launch of a joint venture set to be worth A$1 billion ($610 million) to develop logistics and industrial facilities, after executing the company’s largest capital raising to date in Australia.

An undisclosed global institutional investor has made an initial commitment of A$450 million to the Australia-focused JV, giving it a 45 percent stake, according to a stock exchange announcement today.  A report by real estate publication IPE indicated ESR’s partner in the new platform is Singaporean sovereign wealth fund GIC, which had teamed up with the warehouse developer and fund manager in January for a $500 million China-focused joint venture.

The Warburg Pincus-backed logistics developer and fund manager said that the core-plus partnership – dubbed Australia Logistics Partnership (EALP) – has been seeded with A$715.6 million of logistics assets from ESR’s balance sheet and underlines its long-term commitment to the country

The partnership is seeking to raise a further A$550 billion in equity to top up the total capital commitments to A$1 billion, according to ESR’s announcement.

Deepening Relationships with Capital Partners

The announcement comes just four days after the logistics specialist posted a 21 percent rise in net profit to $245 million for 2019, while reassuring investors that it had witnessed only minimal disruption as a result of the global COVID-19 crisis.

ESR reiterated today the strength of the company’s position in spite of the global challenges resulting from the pandemic, saying in a statement that the new Australian partnership demonstrated the resilience of the firm’s fund management model, which is underpinned by a “deep set of capital partner relationships”.

ESR’s earlier joint venture with GIC, which was announced in January, focuses on developing institutional grade logistics facilities in key cities across China.

The $360 billion Singapore sovereign wealth fund was also one of two external investors in ESR Japan Logistics Fund III, Mingtiandi understands. That fund In May last year closed on an initial JPY 70 billion (then around $630 million) in financing for developing logistics facilities from ESR’s pipeline in the Greater Tokyo area, Osaka and Nagoya.

Tranferring Sheds, Pipeline into New Vehicle

“This is a significant milestone in the growth of ESR Australia as it substantially completes our strategy of recycling capital from the sell-down of our balance sheet to fund the growth of our business,” said ESR Australia’s CEO, Phil Pearce.

The portfolio of logistics assets that ESR has contributed to the partnership include 20 income-producing warehouses, and a total of 19.4 hectares (48 acres) of land. Most of the assets are located on the eastern seaboard, where 76 percent of Australia’s population lives in the country’s three largest cities – Sydney, Melbourne and Brisbane.

Included in the deal are some properties initially acquired through ESR’s takeover of Australian real estate investment manager Propertylink sixteen months ago, according to the company.

Reselling Aussie Assets

ESR’s latest JV marks the third investment vehicle it has set up in four months, with the firm having now wrapped up its programme of transferring balance sheet assets in Australia into new funds.

Just three months ago, ESR established the core-plus business park and industrial investment vehicle ESR Office Partnership IV, which the fund manager seeded with a pair of office buildings in a northeastern Sydney suburb worth A$138 million, siphoning off the assets from the pool of properties acquired through its buyout of Propertylink.

One month before the creation of that partnership, ESR established a A$350 million logistics mandate with China Merchants Capital, the investment management arm of state-owned China Merchants Group.

ESR seeded the mandate – dubbed ESR Australia Logistics Trust – with the transfer of A$175 million in assets located in Brisbane, Melbourne, Sydney and Perth from ESR Australia’s balance sheet, with the partners aiming to double the trust’s portfolio to A$350 million by the end of 2020.

Ramping Up Down Under

ESR is powering on with its expansion in Australia, having built up an arsenal of stabilised assets and land for future development valued at over $2.5 billion since entering the Australian market in July 2018 with its takeover of Propertylink.

The fund manager is dialling in on Australia’s e-commerce-fueled jump in demand for warehouse space, which ESR chairman Jeffrey Perlman has termed the “bedrock” of the company.

Analysts predict that online shopping is set to boom in Australia, with e-commerce forecast to make up 12 percent of all consumer spending in the country next year, according to a report by Australia Post.

With $22 billion in assets under management across Asia Pacific, ESR listed on the Hong Kong stock exchange last October, raising HK$14 billion ($1.8 billion) in the city’s second-largest listing of the year.