ESR-Logos REIT to Buy Greater Tokyo Warehouse From ESR Group for $131M

ESR-Logos REIT has agreed to buy a Greater Tokyo logistics asset for S$183.5 million ($131.4 million), marking the Singapore-listed trust’s first acquisition in Japan.

The trust’s sponsor, Hong Kong-listed ESR Group, will acquire ESR Sakura Distribution Centre in Chiba prefecture from a fund under its management and in turn sell the asset to ESR-Logos REIT, the trust’s manager said Monday in a release.

The facility will be the first direct asset acquisition from ESR’s pipeline of logistics assets since the May completion of the S$1.4 billion merger of ESR-REIT and ARA Logos Logistics Trust, which provided the consolidated trust with enlarged access to ESR’s $149 billion in assets around the region.

“We are pleased to expand the REIT’s footprint into Japan, our second overseas market, with the acquisition of ESR Sakura DC, a freehold asset that will ride on the strong logistics growth trends in the Greater Tokyo area,” said Adrian Chui, chief executive and executive director of the manager.

Near Transport Hubs

Situated in the city of Sakura between Narita International Airport and Chiba Port, the 2015-vintage ESR Sakura Distribution Centre is a five-storey facility with accessibility via ramps and 11 cargo lifts. Green features include rooftop solar panels and LED lighting.

The REIT’s consideration for the warehouse equates to S$2,251 ($16,121) per square metre of NLA for a net property income yield of 4.35 percent (including rental support).

The property’s four tenants include game machine maker Universal Entertainment and warehousing contractor Sanzen Logistics Solution, and the weighted average term to lease expiry is 2.9 years.

Speaking at a Mingtiandi forum in May, ESR-Logos REIT deputy CEO Karen Lee had noted the opportunity for ESR-Logos REIT to access its sponsor’s portfolio as one of the key advantages for the trust post-merger.

As an “interested person transaction”, the deal will require unitholder approval at an extraordinary general meeting for completion. To mitigate leasing risks associated with the acquisition, the sponsor is guaranteeing a year of rent at S$2.4 million each month from the 81,507 square metre (877,334 square foot) facility, which is currently 25 percent vacant.

ESR-Logos REIT holds interests in assets valued at S$5.5 billion. The portfolio comprises 62 assets in Singapore and 21 assets in Australia with a total gross floor area of 2.3 million square metres, as well as investments in three property funds in Australia.

Most recently, the trust sold its Pandan Logistics Hub in Singapore’s Jurong East to ST Logistics for S$43.5 million ($32 million) in a deal announced in late July.

Scalable Japan Market

ESR-Logos REIT’s manager described Japan as a sizeable and scalable growth market for logistics assets, most of which are situated on freehold land, as opposed to the short land leases common in Singapore, Beijing and Shanghai.

Sponsor ESR revealed in June that construction had finished on the first phase of the group’s Yokohama Sachiura Logistics Park, which is expected to be Japan’s most valuable complex of its type upon completion.

ESR Yokohama Sachiura Distribution Centre 1 is a four-storey, double-ramp warehouse with a gross floor area of 195,342 square metres. The four-phase logistics park will provide 720,000 square metres of logistics space and have a total completed value of $2.5 billion.

Speaking on MTD TV’s Japan logistics investment panel in May, APG Asset Management director Brian Hung said the country’s logistics market had generally outperformed most of its peers in Asia Pacific and would likely continue taking the lead given a relatively stable environment and a healthy e-commerce sector.