Japan’s Mitsubishi Estate Invests in $113M ESR Melbourne Project

Industrial giant ESR has teamed up with Mitsubishi Estate on a joint venture that will see the Japanese builder invest in an Australian project with an end value of A$175 million ($113 million).

The project forms part of a 25.1 hectare (62 acre) site in Melbourne’s southeast suburb of Pakenham, Hong Kong-listed ESR said late last week. The Warburg Pincus-backed group purchased the site as a balance-sheet asset in 2021 and later sold a 13 hectare section to a private owner-occupier.

The ESR Australia and Mitsubishi Estate Asia joint venture is acquiring the remaining 12.1 hectares for an undisclosed price, with plans to develop the land into a 70,000 square metre (753,474 square foot) industrial estate called Enterprise Industry Park.

“The partnership aligns with the broader ESR Group’s continued focus on lightening its balance sheet and diversifying capital sources,” said Phil Pearce, chief executive of ESR Australia and deputy CEO of the group.

First Stage Underway

The first stage of Enterprise Industry Park is under construction, with the 12,600 square metre space pre-leased to a global textile manufacturer and expected to be completed in early 2025, ESR said. The project’s second stage is to start in the second half of this year and is now available for lease.

ESR originally acquired the development site at 92 Enterprise Road near Princes Freeway for A$34 million, according to an account in the Australian Financial Review. Enterprise Industry Park will be 80 percent held by Mitsubishi Estate and 20 percent by ESR, the AFR said.

Billed as Mitsubishi Estate Asia’s first significant investment in an industrial property, the project sits 30 kilometres (18.6 miles) from a last-mile logistics site being acquired by US-based PGIM Real Estate and Elanor Investors Group in Melbourne’s southeast suburb of Mulgrave.

Sydney-based Elanor and Icon Developments, a unit of Japan’s Kajima Corporation, recently agreed to acquire a 4.4 hectare site in the northern Melbourne suburb of Broadmeadows for development into a logistics estate with an end value of A$90 million.

Yuzo Nishiyama, Mitsubishi Estate Asia’s head of Australia, hailed the ESR deal as a key milestone in the company’s strategic expansion Down Under, where the firm also invests in residential, hospitality and office properties, including Sydney’s 60 Margaret Street.

“MEA’s goal is to expand further in these key sectors with the valuable support of our trusted partners,” Nishiyama said.

Japan Outbound Stays Hot

Mitsubishi Estate is a prolific player in an outbound spending boom that saw Japanese investors more than double their acquisitions of Asia Pacific real estate in 2023 as they spent $2.24 billion on income-earning properties around the region.

Last month, a JV of Mitsubishi Estate and Aussie builder Lendlease outlasted rivals to acquire a residential site in Sydney’s eastern suburbs for development into a A$500 million project.

In June, Mitsubishi Estate and fellow Japanese giant Mitsui & Co partnered with US developer Hines to buy a northern Singapore logistics asset from British American Tobacco for an undisclosed price. The four-storey facility at 15 Senoko Loop had been put on the market in late 2022 for S$100 million (now $75.7 million).