ESR-Reit proposes to buy 5 logistics assets in Australia for US$192.4 million

[SINGAPORE] ESR Real Estate Investment Trust (ESR-Reit) has proposed to buy five freehold logistics properties in Melbourne, Australia, for A$276.8 million (US$192.4 million).

The acquisition would increase its distribution per unit (DPU) by 4.3 per cent on a pro forma basis, the Reit’s manager said on Tuesday (Jul 7).

The net purchase consideration represents a 1.9 per cent discount to the market valuation of the properties.

The acquisition will be funded with proceeds from the divestment of properties and debt financing. ESR-Reit previously divested eight industrial properties and a hotel strata lot in Singapore.

The properties will be acquired from Frasers Property, which said in a separate bourse filing that the divestment of the five properties is part of its ongoing active portfolio management initiatives.

Frasers Property said the divestments are not expected to have a material effect on its net asset value per share and earnings per share for the current financial year.

ESR Reit’s manager noted that the Australian logistics sector continues to benefit from favourable long-term structural tailwinds, including resilient occupier demand, supply chain modernisation and growing demand for high-quality logistics infrastructure.

“Together with the earlier divestments, we have largely addressed ESR-Reit’s land lease decay conundrum while minimising the DPU drag typically associated with portfolio repositioning,” said Adrian Chui, chief executive and executive director of the manager.

Beyond the immediate DPU accretion, Chui expects the acquisitions to further strengthen the quality and resilience of the Reit’s portfolio by increasing exposure to modern, freehold logistics assets with strong occupancy and a high-quality tenant base.

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The manager noted that the portfolio’s weighted average lease expiry of 3.2 years comprises a combination of longer-term leases and shorter-term ones, allowing it to capture near-term rental reversions.

Following the completion of the deal, Singapore will continue to account for more than three-quarters of the Reit’s enlarged portfolio by rental income, while Australia’s contribution will increase to 15.5 per cent from 12.7 per cent.

On a pro forma basis, the manager expects aggregate leverage to be 41.9 per cent, within its target range, following the transaction.

Units of ESR-Reit ended 1.3 per cent or S$0.03 higher at S$2.34 on Tuesday, before the announcement.