APG to Buy 20% of Warburg Pincus-Backed e-Shang for $650M

Dutch pension fund asset manager APG Asset Management announced late last week that it is committing up to $650 million to acquire 20 percent of China warehouse developer and operator e-Shang, and to set up a joint venture with the Warburg Pincus-backed startup.

The deal is the latest in a series of moves by international investors to seize opportunities within China’s highly profitable logistics real estate sector.

In a statement issued jointly by APG and e-Shang, the two companies said that the new joint venture’s purpose is “to develop and own institutional-grade, modern logistics real estate assets across China,” where the country’s rapidly developing retail sector and e-commerce boom have created a shortage of efficient warehousing.

Building 1.5M Sqm of Space for China’s Retail Sector

Since being co-founded in 2011 by private equity firm Warburg Pincus and two veterans of China’s industrial real estate industry, e-Shang has rapidly put together a portfolio of 1.5 million square meters in completed and ongoing projects in China. In addition to developing international standard warehouses, the company also provides logistics services from prime locations across greater Shanghai, Beijing, Guangzhou and a number of second-tier cities.

Commenting on the deal, Sachin Doshi, Head of Non-Listed Real Estate for Asia-Pacific at APG, said, “We have watched this sector closely over the last few years and this investment is consistent with our strategy to gain the right exposure to the Chinese logistics real estate market.”

In December 2013, e-Shang successfully secured a $120 million pre-IPO loan from Goldman Sachs and to date has raised over $1 billion of equity capital.

Jeffrey Shen, Co-founder and Chief Executive Officer of e-Shang, said, “We are excited to have APG as our new shareholder and joint venture partner to explore more opportunities and further expand our warehousing and logistics servicing platform in China.”

Investment Funds Love China’s Logistics Sector

The investment by APG marks the continuing of a trend by international investment concerns, including Carlyle Group, Equity International, and Temasek Holdings, to look for ways to gain access to China’s dependably profitable and rapidly growing logistics sector.

Commenting on his APG’s decision to invest in the sector, Doshi said that, “With the continued growth of third party logistics, e-commerce and the evolution of domestic consumption patterns combined with a severe shortage in the supply of modern logistics facilities, we strongly believe that the logistics real estate sector in China will be a long term beneficiary of these trends.”

In February this year leading regional logistics developer GLP received $2.51 billion from a consortium of Chinese investors including Bank of China Group Investment and private-equity firm Hopu Funds for a 34 percent stake in GLP China, as well as a stake in the Singapore-listed parent company.

In April of this year an investment firm linked to Temasek Holdings and Hong Kong-based private equity firm RRJ Capital invested $250 million into China warehouse developer Yupei, which had earlier struck a $400 million deal during August last year with US private equity giant the Carlyle Group.

Also during August last year, Equity International, a private equity firm run by US investor Sam Zell announced a strategic partnership with Asia-focused logistics real estate fund The Redwood Group for expansion of Redwood’s logistics property platform in the region.