ESR moves ahead with its largest logistics fundraise in Australia

Even during a pandemic-induced crisis, ESR remains confident about fundraising momentum for its new A$1 billion ($606 million, €553 million) Australia-focused logistics vehicle.

The Hong Kong-based logistics real estate firm has focused on securing the anchor investor for the ESR Australia Logistics Partnership over the past few months, according to Phil Pearce, CEO of ESR in Australia. The anchor investor is understood to be Singaporean sovereign wealth fund GIC, which has made an initial commitment of A$450 million. With GIC’s commitment now in place, the firm is seeking to raise the remaining 55 percent of the A$1 billion target before the end of the year.

Pearce declined to confirm the identity of the investor but he told PERE that the two parties began talks on the fund late last year, with the cornerstone investor completing final due diligence in January.

He said ESR is presently in early discussions with other institutional investors, and despite the current coronavirus-related travel restrictions, the firm still has sufficient time to fundraise until the end of the year.

“I think the covid-19 should have limited impact on their outlook and long-term approach” in logistics real estate, Pearce added. Investors that commit to the new vehicle, which has a more than seven-year investment horizon, will be “looking through the cycle.”

EALP is ESR’s first open-ended vehicle in Australia as well as its largest targeted capital raise to date in the country. With a core-plus return target, ESR will invest in both development projects and operating assets. The vehicle will be seeded with A$715.6 million of prime logistics assets currently held on ESR’s balance sheet.

In fact, Pearce believes the sector will emerge from the crisis in a stronger position than other property sectors, since e-commerce activity, a demand driver for logistics space, has picked up during the pandemic.

Pearce told PERE that e-commerce penetration in Australia, which currently lags those of other countries in the Asia-Pacific, has been accelerating. “Australia has been a slow adopter of e-commerce or online retail. In China and Korea, e-commerce has got to 12-15 percent of retail sales. In Australia, it’s about 6-7 percent now. I think what happened in China and Korea will get replicated in Australia,” Pearce explained.

The firm has been actively expanding its presence in Australia, which represents 7 percent of ESR’s $22.1 billion in assets under management, over the past 12 months. Apart from acquiring the A$1.8 billion Australia-listed property firm Propertylink, the firm also raised A$350 million and A$138 million for ESR Australian Logistics Trust and ESR Office Partnership IV, respectively, in 2019.