Warburg Pincus and Sun Dongping Commit $220M to China Industrial Developer

Private equity giant Warburg Pincus announced this week that it is joining with Sun Dongping, the chairman of logistics developer e-Shang Redwood, to invest $220 million into business park and manufacturing developer D&J China.

The B-round investment follows the 2014 co-founding of D&J by Warburg Pincus and Sun, and brings the total cash committed to the industrial developer by the partners to $420 million, according to a statement by the private equity firm.

The new round of fundraising follows just a few weeks of the successful merger of an earlier venture by the two partners — logistics developer e-Shang — with Singapore-based competitor the Redwood Group. Since renamed e-Shang Redwood, the warehouse builder and operator is said to be headed for an IPO worth well over $1 billion within one year’s time.

Now the partners appear to be hoping that D&J will help them replicate their logistics success in other areas of the industrial real estate sector.

D&J Already Developing Projects in the Yangtze River Delta

According to sources at D&J who spoke with Mingtiandi, the company already has industrial projects underway in the cities of Changzhou and Wuxi in Jiangsu province – both less than one hour from Shanghai by high speed train.

D&J is said to have around one million square metres of business park, manufacturing and R&D space currently under development, and is also targetting the data centre market. The company’s existing tenants include multinationals such as Shell, Abbott and FMC, as well as high-tech firms Asiainfo and iSoftStone.

“Driven by China’s economic transformation, limited supply of office stock in CBD and improvement in infrastructure, high-quality business parks will attract more players to the market,” said D&J China chairman and CEO Sun Dongping.

Warburg Pincus Gets Industrial About China Real Estate

While manufacturing and business park space have not gotten the attention that China’s logistics sector has in recent years, Sun and Warburg Pincus seem willing to bet that they can repeat their warehouse success by pursuing more industrial projects on the mainland.

Commenting on this latest round of investment in D&J, Ellen Ng, Managing Director of Warburg Pincus, said, “We are excited with our second strategic partnership with Mr. Sun. Warburg Pincus will leverage its global resources and capital strength to help grow the company into the leading player in the space.”

In the past five years the partners have been able to build e-Shang into what they say is China’s second largest warehousing and logistics facility developer and operator. After expanding into Korea in 2014, and gaining a major platform in Japan via the Redwood merger, Warburg Pincus and Sun now lay claim to having created Asia’s largest pure-play logistics developer and service provider.

While the prospects for business park and workshop development may not appear as rosy as the outlook for warehouse space, the typically suburban locations of these property types has already made them popular with a select set of long term investors.

By picking up low-priced industrial land on the outskirts of large cities in China, and then building low-rise office or workshop space for leasing purposes, some developers are betting that their leasing yields may be supplemented by the ability to flip these suburban plots for residential or higher value commercial real estate projects several years down the road.

Warburg Pincus has made real estate one of its favorite sectors in China and has already invested more than $2.4 billion in 20 companies and projects across developers, operators, asset managers, and asset/project portfolio joint ventures in the country. In addition to e-Shang and D&J, the firm has also invested in 7 Days Inn, Greentown, Guangzhou R&F, Franshion Properties, Mofang Apartment, Red Star Macalline and Sunshine 100.