PGGM Commits Another $160M to Redwood China Logistics Fund

Dutch pension fund manager PGGM has committed another $160 million to the Redwood China Logistics Fund just over one week after the fund’s parent firm merged with a mainland rival, as revealed in an exclusive report on Mingtiandi.

With this latest investment, PGGM has now put $430 million into Redwood’s China fund, which focuses on developing and operating logistics facilities on the mainland.

The Redwood Group, which is Singapore-based, merged with Warburg Pincus-backed e-Shang to form e-Shang Redwood (ESR)in an all-stock transaction on January 21^st. The merger of the two warehouse builders aims to create a region-wide player with ambitions to compete with industry leader GLP and Australia’s Goodman in Asia’s logistics real estate market.

Dutch Sign Up for More China Sheds

This latest equity commitment by PGGM, which has EUR 183.3 billion ($198.5 billion) in assets under management, is the third time that the Dutch cooperative has invested in Redwood’s China fund since it was established in 2012.

“Over the past years they (Redwood) have built up a sustainable and high quality portfolio and platform in China,” Thijs Schoenaker, senior investment manager with PGGM Private Real Estate said in a joint statement. “The merger with e-Shang will further strengthen the platform and add value for their customers in Asia.”

PGGM was a seed investor in Redwood’s fund and added another $144 million in 2014. The fund manager has also invested in Redwood’s Japan platform.

ESR Becomes a Regional Player

The new funding provides an important vote of confidence for e-Shang Redwood, coming within days of the merger signing. The combined company is said to be aiming for a $1 billion IPO in Hong Kong within the year, according to sources that have spoken with Mingtiandi.

ESR now has a combined 3.5 million square metres of projects either established or under development across China, Japan and South Korea, according to the company, and has attracted investment from some of the world’s largest private equity investors.

With the rapid growth of ecommerce and domestic consumption helping to fuel demand for large-scale distribution facilities in China and elsewhere in the region, logistics real estate assets have become increasingly attractive to institutional investors, particularly as retail and office sectors have begun to suffer lower investment yields in some markets.

Following the merger, in addition to PGGM, ESR now has the support of investors including another Dutch pension fund manager, APG; US private equity firms Warburg Pincus, CBRE Global Investors and Equity International; and Canada’s CPPIB; as well as Morgan Stanley and Goldman Sachs.