Warehousing and LogisticsClare BurnettThu 09 Jul 26
Quality-Hunting ESR Scoops Up $277m Melbourne Industrial Assets
ESR has acquired a $276.8-million quintet of industrial assets in Melbourne as it restocks its war chest and raises the quality of its portfolio.
ESR-REIT, via its Singaporean parent company, announced this week it had acquired the institutional grade freehold logistics properties dubbed the Melbourne Super Prime Collective from Frasers Property Industrial.
To make way for the acquisitions, the developer and investor divested $489 million in “non-core” Singaporean assets with short remaining land lease tenures and older specifications.
ESR said the move allowed the sale of mature assets “ahead of diminishing returns setting in”.
With its eye on higher quality assets, it swooped on Melbourne’s industrial market, acquiring the five logistics sites that have a total gross lettable area of 122,411 square metres.
Companies related to Frasers sold the assets to ESR, which included two warehouse sites at Truganina; 15 and 33 Archer Road for $64.2-million and 4-12 Doriemus Drive for $49.2 million.
It also offloaded 64 West Park Drive at Derrimut for $41.7 million, as well as two assets at Keysborough—39 Naxos Way for $49.8 million, and 58-76 Naxos Way and 68 Atlantic Drive [pictured at top] for $71.9 million, a discount of 4.8 per cent on its valuation.
According to ESR, the properties benefit from strong connectivity, proximity to key transport infrastructure and access to major employment and distribution hubs, with an average building age of 11 years, an occupancy rate of 90 per cent and a weighted average lease expiry of 3.2 years.
A “high-quality tenant base” includes CEVA Logistics, Silk Logistics and Nick Scali, ESR said.
The assets were bought at a 1.9 per cent discount to the market valuation of the properties, ESR said, and the sales mark a blended initial yield of 5.5 per cent.
ESR chief executive Adrian Chui said the acquisitions were an “important step” in the execution of its approach to capital recycling.
The acquisitions “provide embedded organic growth through positive rental reversions, supporting sustainable earnings growth and long-term value creation for unit holders,” he said.
“The acquisitions further strengthen the quality and resilience of our portfolio by increasing our exposure to modern, freehold logistics assets with strong occupancy and a high-quality tenant base,” Chui said.
“Together with the earlier divestments, we have largely addressed ESR-REIT’s land lease decay conundrum while minimising the [Distribution Per Unit] drag typically associated with portfolio repositioning through a disciplined and timely capital recycling approach.
“With a higher-quality portfolio, enhanced financial flexibility and a disciplined capital allocation framework, ESR-REIT is well-positioned for sustainable income and capital growth, delivering long-term total returns for unitholders.”
Settlement on the deal, which is due to complete this quarter, is subject to a Foreign Investment Review Board review.
