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

ESR Milestone Partnership (EMP) and ESR Australia have entered into a binding agreement with Blackstone to acquire the Milestone Portfolio and MOL for a total of $3.8 billion, subject to merger clearance approval in relevant jurisdictions.

The deal represents the largest ever logistics and general property portfolio transaction in Australia, with the portfolio consisting 45 high-quality, income-producing assets across Australia’s major capital cities.

With a land area of 3.6 million sqm and GLA of 1.4 million sqm, the site cover is a modest 38% and provides significant scope for further development. The transaction will see ESR emerge as the third-largest logistics landlord in Australia, with its assets under management increasing to $7.9 billion.

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ESR Australia CEO, Phil Pearce, described the acquisition as transformative providing ESR’s Australia business with immediate scale.

“The opportunity to secure such a large portfolio with extremely well-located assets across Adelaide, Brisbane, Melbourne, Perth and Sydney, strategically positions EMP to benefit from the continued growth in demand for warehouse space, particularly as the robust demand for logistics real estate is expected to remain strong due to sustained growth in e-commerce,” Pearce said.

“The portfolio is land rich, with low site coverage of only 38%, providing plenty of opportunity for ESR to redevelop these assets over time,” he said.

The portfolio consists of national, multi-national, ASX listed or government clients such as Woolworths, Lineage Logistics, Toll (Japan Post), Daimler Benz, Australia Post, Mazda and WesTrac.

The consideration attributed to the portfolio is expected to provide an initial yield of 4.5% with a 6.9-year Weighted Average Lease Expiry.

ESR Co-founders and Group Co-CEOs, Jeffrey Shen and Stuart Gibson, remarked that the acquisition of the Milestone portfolio is a significant leap forward for ESR.

“This tremendous expansion not only adds immediate scale to our presence in Australia and the region, but also extends our footprint and reaffirms our commitment to one of our highest conviction markets in Asia Pacific,” Shen and Gibson said in a joint statement.

“Under Phil’s leadership, we have built a great platform and a top-notch team in Australia. This has been a key factor in ESR’s ability to establish itself as a major mover in this critical market,” the co-founders said.

The sale process commenced in January 2021 and was highly competitive with more than ten first-round bids received, subsequently reduced to five parties.

The Transaction is subject to Foreign Investment Review Board (FIRB) approval being obtained.

Source: ESR Australia