ESR swoops on Sydney logistics gem as M&G exits
ESR Australia chief executive Philip Pearce.
Asian warehousing giant ESR has swooped on a logistics property in Sydney’s Erskine Park, picking it up from British real estate manager M&G for $107m for a mandate client.
The move continues ESR’s run of buying properties in the city’s western suburbs and shows that industrial assets with short weighted average lease expiries are still in demand.
The sale also showed gains for M&G which picked up the site for about $50m in 2015 as part of a two property deal in which it outlaid a total of about $80m and also bought in Ingleburn.
JLL’s Ben Hegerty and Jack Kelliher brokered the latest deal on the 57-65 Templar Rd, Erskine Park asset, but declined to comment. The site spans 63,272sq m and is on the western side of Templar Rd in the prime industrial suburb.
It comprises a modern industrial estate with two freestanding buildings that have 30,114sq m of space. The weighted average lease expiry (WALE) is about 2.2 years by income and it sold on a sharp initial yield of about 3.7 per cent but showed a market capitalisation rate of about 6.5 per cent, a sale analysis showed.
ESR Australia chief executive Phil Pearce said the property had relatively short WALE and there was the chance to benefit from rents reverting to market levels. He said the location was highly sought after and was benefiting from the broader rental rises across Sydney.
The deal also shows that properties with shorter lease terms are being traded at or around book values as buyers can access rental gains, while longer leased properties are harder to move at the moment.
ESR bought the property for one of its core-plus mandates and Mr Pearce said the purchase showed there were opportunities for the right assets.
“We were still active in the market,” he said. “We’re confident that we should be able to get some good rental reversion as the leases come up.”
Others are also buying.
Irongate last week launched an unlisted industrial property fund, kicking off with the $57.25m acquisition of adjoining industrial properties in Sydney’s Smithfield.
The Irongate Industrial Property Fund is focused on low-risk infill sites with large land holdings, and also looking for income-generating properties with strong positive rental reversion.
This strategy follows in the footsteps of the Irongate REIT – which was taken over by Charter Hall’s managed funds last year. The new vehicle has seed funding from Irongate, which underwent a separate management buyout, and its partner, the Johannesburg-listed Burstone Group.
The fund is buying the Smithfield assets alongside Asia-focused private equity real estate group Phoenix Property Investors.
The adjoining properties in Smithfield at 338-350 Woodpark Rd and 1 Dupas St, were acquired from the private EK Nominees.
They have a combined land area of 33,988sq m and eight buildings with 17,546sq m of space. They also have a short 1.7 year WALE.
The Smithfield deal was brokered by Colliers’ Trent Gallagher, Gavin Bishop, Sean Thomson, and Peter Dale.
