GIC and ESR Cayman to acquire Australia property portfolio for A$3.8 billion

SINGAPORE (THE BUSINESS TIMES) - Entities of GIC and Hong Kong-listed ESR Cayman have entered into an agreement on Saturday with funds managed by Blackstone to acquire a property portfolio in Australia for A$3.8 billion (S$4.1 billion).

In an exchange filing on Sunday, ESR Cayman said the property portfolio is the "largest logistics portfolio ever put to market in Australia".

Subject to merger clearance approval in South Korea and China, Bidco - an entity 20 per cent owned by ESR Cayman and 80 per cent owned by GIC (Realty) - will enter into unit sale agreements with the Blackstone funds for the acquisition of the property portfolio.

The portfolio comprises 45 industrial and logistics real estate assets in Australia with an aggregate land area of 3.6 million sq m and building gross leasable area of 1.4 million sq m.

The aggregate value of the portfolio was A$3.43 billion based on valuations determined by independent property valuers. The property portfolio has an initial yield of 4.5 per cent and a weighted average lease expiry of 6.9 years.

It includes assets situated within the core industrial sub-markets of Sydney, Melbourne, Brisbane, Perth and Adelaide.

GIC and ESR Cayman will co-invest in the property portfolio by funding the acquisition in proportion to their respective interests. ESR Cayman will fund A$753 million - being 20 per cent of the consideration for the property portfolio and related costs.

Australia and New Zealand Banking Group, MUFG Bank, Standard Chartered Bank and United Overseas Bank are providing fully underwritten debt facilities for the acquisition of the real estate assets, ESR Cayman said.

"With a quality blue-chip tenant pool, the property portfolio provides secure medium (to) long-term income for Bidco," ESR Cayman said. "Given the prime locations of the properties and low site cover within the portfolio, multiple near-term and longer-term redevelopment opportunities exist."

The properties are being acquired on a 100 per cent occupancy basis with two years of rental support provided by the property vendors for any outstanding vacancies at the time of completion.

In connection with the property acquisition, a subsidiary of ESR Cayman will also enter into an agreement to purchase an entity which provides support and trustee services to the property portfolio.

Following this, ESR Cayman expects to provide management services for the property portfolio, which will "significantly increase the recurring earnings generated from the group's Australian business".

"The group expects this acquisition will result in it becoming the third-largest manager of logistics real estate in Australia based on assets under management (AUM) and total area," ESR Cayman said, noting its AUM would rise to A$7.9 billion.

Subject to the satisfaction of mandatory conditions, completion of the property acquisition is expected to take place by Oct 17, 2021.