ESR set up shop in Australia

ESR set up shop in Australia

6 July 2018

Asian logistics platform ESR has set up shop in Australia, buying out industrial developer CIP from Charter Hall and its co-investors in a $102.5 million deal that will allow it to expand locally, reports The Australian Financial Review.

Controlled by US private equity giant Warburg Pincus, the Asia-based ESR entered this market for the first time last year with dramatic raids on local fund managers, Propertylink and Centuria Capital, establishing sizeable stakes in each.

The 50 per cent stake realises an enterprise value of $102.5 million for Charter Hall, delivering a $9.5 million premium to its book value.

Ex-Goodman Group executive director Philip Pearce has been appointed chief executive of ESR Australia, who described this market as the “missing piece of the puzzle” for the pan-Asian player.

“The launch of ESR Australia underlines ESR’s commitment to a long-term presence in Australia,” Pearce said.

“[The] acquisition of CIP creates a strong foundation for our local business. CIP has a highly-experienced management team with a track record of delivering results, all of whom will remain in the business.”

The acquisition of the CIP platform, which has a land bank and pipeline of projects, gives ESR a running start in this market to push its development-led investment strategy, fuelled by offshore capital.

ESR is backed by the deep pockets of global institutional investors including Dutch pension fund managers APG and PGGM, Canada’s CPPIB, Goldman Sachs, Chinese insurance giant Ping An and South Korean conglomerate SK Holdings.

Charter Hall managing director David Harrison said the partnership has delivered an annual 10 per cent average cash franked dividend to shareholders.

“The partnership has also contributed over $1 billion of pre-leased investments contributing to our now $6 billion of industrial and logistics investment assets, together with a further $1.5 billion development pipeline.

“The partnership has delivered high quality pre-leased industrial investments to major tenant customers such as Australia Post, VW, Ceva, AHG, Coles, Target, Reject Shop, Couriers Please and many others, with a total of 30 pre-leased industrial investments secured.”

Charter Hall has 24 industrial projects under construction with its in-house development arm.

The CIP land bank would build out to around 600,000sq m – worth potentially $1.25 billion – and includes pre-committed projects of around $80 million. ESR will look to add more sites and projects to that.

ESR will also be facing off against local heavyweights, not only Charter Hall itself, but Goodman and private vehicles such as the Macquarie-backed LOGOS, which only this week took over a large site in Melbourne’s west with scope for a $250 million development.

Set up in 2003, CIP has developed more than 1.5 million sqm of commercial and industrial projects, with a combined value of more than $2.5bn. The company has an $80m portfolio of contractually pre-committed development projects across Australia’s eastern seaboard with a fully developed end value topping $1.25bn over the next five years and gross floor area at completion of more than 600,000 sqm.

The CIP transaction has been approved by the Foreign Investment Review Board and is expected to settle this month.