ESR-Logos REIT Buying Japan Warehouse, Stake in Singapore Sheds for $577M

ESR-Logos REIT has entered into separate agreements to acquire a Japan logistics facility and a majority stake in a Singapore industrial complex for a total of S$772.6 million ($577.3 million).

The Singapore-listed trust will buy ESR Yatomi Kisosaki Distribution Centre in Nagoya from its sponsor, Hong Kong-listed warehouse giant ESR, and a third-party investor for S$328 million, the REIT’s manager said Wednesday in a release.

The REIT will also acquire a 51 percent interest in 20 Tuas South Avenue 14, in Singapore’s western region, from funds managed by ESR subsidiary Logos for S$444.6 million. The transactions are to be funded by a mix of green debt financing and the proceeds from a preferential offering of new units backstopped by ESR.

“By integrating these high-quality assets, E-LOG’s portfolio will increasingly pivot towards future-ready green assets, reinforcing our commitment to sustainability and long-term value,” said Adrian Chui, CEO and executive director of the manager.

Scaling Up Presence

Completed in 2022, ESR Yatomi Kisosaki Distribution Centre is a four-storey, double-ramp logistics facility with 134,863 square metres (1.5 million square feet) of net lettable area. The property in northeastern Mie prefecture has road connectivity to the Ise-Wangan Expressway and the Port of Nagoya’s container terminal.

The purchase of the freehold property is aimed at scaling up ESR-Logos REIT’s presence in Japan, where the trust has a single property, the 81,507 square metre ESR Sakura Distribution Centre in Chiba prefecture.

Because the facility has a committed occupancy of 89.4 percent as it undergoes its first cycle of lease expiries and renewals, the manager has negotiated net property income support of up to JPY 400 million ($2.7 million) from ESR for the 12 months following completion of the acquisition. ESR is in advanced talks with a potential tenant for a lease which could boost occupancy to 93.2 percent and give the property a weighted average lease expiry of 2.8 years, according to the manager.

Situated near Singapore’s Jurong Tuas industrial estate, 20 Tuas South Avenue 14 is a high-spec manufacturing facility with newly constructed ramp-up warehouses. The 247,063 square metre leasehold property (44 years remaining) has a stabilised occupancy of 99.7 percent and a WALE of 11.2 years.

“Given its close proximity to Tuas Mega Port, 20TSA is able to capture the in-built demand for both logistics space and warehousing space, including specialised storage such as cold storage and dangerous goods,” the manager said.

Income Setback

ESR-Logos REIT posted first-half distribution per unit of 1.122 Singapore cents, down 18.6 percent from a year earlier, as net property income fell 9.2 percent after the sale of 182-198 Maidstone Street in Melbourne to Fife Capital and the decommissioning of 2 Fishery Port Road in Singapore’s Jurong area.

The weakness was partly offset by additional income contributions from 7002 Ang Mo Kio Avenue 5 and 21B Senoko Loop after the properties completed their asset enhancement initiatives, the trust’s manager said.

“The proposed acquisitions from our sponsor’s pipeline are quality on-strategy assets and timely for E-LOG as we continue to execute our 4R strategy to rejuvenate our portfolio and recycle capital into modern, in-demand new economy assets with green features on freehold or longer land leases to improve the quality of our earnings and distributions,” Chui said.

At the end of June, ESR-Logos REIT’s S$5 billion portfolio comprised 71 properties in Singapore (52), Australia (18) and Japan (one), with a total gross floor area of 2.1 million square metres, as well as investments in three property funds in Australia.