ESR Australia acquires five Melbourne industrial properties for $106.5M

Industrial specialist ESR Australia has expanded its Victorian footprint with the acquisition of five income-producing properties in Truganina, Kilsyth, Keysborough, Port Melbourne and Dandenong for $106.5 million.

The assets were purchased over the past two months via the business’ core plus ESR Australia Logistics Platform II (EALP II).

ESR said the properties have a weighted average lease expiry of 5.69 years and a weighted average capitalisation rate of 4.46 per cent.

ESR Australia CEO, Phil Pearce, said the business has been experiencing robust leasing enquiry, particularly from customers in Melbourne seeking quality sites in prime locations.

“The Victorian industrial market is proving to be a source of great opportunity, and ESR Australia is delighted to be ramping up our presence and capitalise on these opportunities,” Pearce said.

“Given the record high occupancy and record levels of demand being experienced across the major markets we expect rental to compensate for any expansion in cap rates following substantial compression over the past year,” he said.

ESR acquired the Port Melbourne properties at 102-130 Turner Street for $28.1 million, which has three warehouses on the site leased by multiple tenants.

The asset, which consists of two sites that were combined into a single parcel, are the closest ESR Australia holds in proximity to Melbourne’s CBD.

“Port Melbourne is going to see a major transformation over the next ten years, and when a rare opportunity presented itself to acquire assets within the Fishermen’s Bend “Employment Precinct” we seized the opportunity,” Pearce said.

The Dandenong South property at 4 Healey Road, acquired for $15 million, comprises a 1.8ha site with two years of holding income.

The site will provide the option to either re-lease or re-develop when the tenant vacates.

ESR Australia purchased the 22,850 sqm site at 147-153 Canterbury Road in Kilsyth for $22.2 million. More than $1 million has been invested in infrastructure upgrades to the site over the past five years.

The Kilsyth asset is fully leased to B&D Australia, a subsidiary of the Dulux Group, who have been in occupation of the site for 50 years and has renewed their lease to 2027.

The 1.9ha site at 321-327 Greens Road, Keysborough, was built in 2021 and acquired for $25 million off-market. The core 4-unit logistics estate is fully leased to embedded tenants on first-generation leases.

“The acquisition of the sites in Dandenong South, Kilsyth and Keysborough play into EALP II’s core-plus strategy to acquire sites in Melbourne’s land constrained Southeast,” Pearce said.

“These three income-producing sites will further establish ESR Australia’s presence on the ground, and with the sustained growth of demand, we anticipate healthy returns,” he said.

Related: ESR Australia to buy Milestone Portfolio in a landmark deal with Blackstone

Source: ESR Australia