M&G Real Estate’s Asia property fund has entered a partnership in Japan with ESR and its subsidiaries to develop a portfolio of logistics properties across Tokyo, Osaka and Nagoya.

The partnership, for which the M&G Asia Property Fund intends to deploy up to $350m (€348.5m) in equity, is expected to expand the ESR-managed and M&G-invested logistics portfolio to more than $1bn in gross asset value.

The inaugural project under the partnership is the Nagoya Minami 2 Distribution Centre. Construction is expected to commence in November this year, with completion slated for October 2023. 

M&G will hold a majority interest in the logistic facility on behalf of its M&G Asia Property Fund, with ESR managing the facility upon completion.

The rationale for the deal rests on the fact that the project taps into “significant opportunities in this market”. M&G and ESR said Greater Nagoya has the highest output of manufactured goods in Japan, underpinning a greater demand for logistics properties.

Jing Dong Lai, CEO and CIO, Asia at M&G Real Estate, said: “The logistics sector is an important part of Japan’s economy and demand for state-of-the-art facilities remains robust.

“M&G Real Estate has been active in this space for many years and we are delighted to formalise our long-standing relationship with ESR, an eminent logistics expert, leveraging on their capabilities to capitalise on strong market demand for high-quality assets in this space.”

Stuart Gibson, co-founder and co-CEO of ESR, said: “We are excited to solidify our partnership with this third transaction and the first development in Japan with M&G Real Estate Asia, an experienced global investor in the sector.”

This latest project builds on M&G’s expanding relationship with ESR. The firms have previously teamed up on two other logistics centres in Ichikawa and Nagoya. 

Richard van den Berg, manager of the M&G Asia Property Fund, said: “This partnership strengthens our commitment to Asia logistics, one of our central investment themes. Increasing our allocation to Japanese logistics will enable us to further diversify our portfolio and provide our investors with a resilient income stream.

“This build-to-core strategy additionally enhances the overall building age of the portfolio.”

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