Carlyle Keeps Focus on China Logistics After $460M July IPO

Carlyle Group’s head of real estate for Asia says the US private equity giant plans to keep looking for opportunities in China’s logistics sector, following the successful July IPO of China Logistics Property Holdings.

The Shanghai-based warehouse developer raised nearly $460 million during its July debut after the company had secured Anbang Insurance and Sino-Ocean Group as cornerstone investors in June.

“If you look at where’s our primary focus today and quite frankly going forward, it’s China and within China, it’s specifically logistics and office,” Carlyle’s Head of Asia Real Estate Jason H Lee told Reuters last week.

Carlyle along with private equity real estate investors the Townsend Group had formed a $400 million joint venture with China Logistics Property in 2014, when the company founded by Anhui entrepreneur Li Shifa was still known as Yupei.

Carlyle Encouraged by Mainland Ecommerce

For Lee, the returns being squeezed from China’s warehouses are part of a broader consumption story that is being led by the country’s booming ecommerce sector. “This is really part of the whole broader transformation of the Chinese economy, and of course, domestic consumption is the key macro trend. Logistics is highly supported by not only the broader consumption trend, but more specifically, the growth in e-commerce,” Lee said in the Reuters account.

With warehouses in mainland China averaging leasing yields of 7-8 percent, the logistics real estate sector continues to be one of the country’s most consistent performers. The National Development and Reform Commission (NDRC) reported the logistics sector brought in RNB7.6 trillion in 2015. That figure is likely to climb steadily during the next few years as e-commerce grows in popularity.

The country is now home to the world’s largest e-commerce market with $464 billion in online retail sales taking place in 2015. And while buying shows no signs of letting up, finding a place to store these goods continues to be an issue. A LaSalle Investment Management report noted there is currently a shortage of logistics facilities in China and demand for these properties continues to outpace supply.

CLP IPO Fares Better Than Projections

Carlyle’s path to China warehouse riches got a boost in 2014 when Singapore’s Temasek Holdings and private equity shop RRJ Capital agreed to invest another $250 million into Yupei. And while Brexit forced the developer to push back the start of the offering by a couple of days, the sale eventually brought in significantly more than the $300 million than the company had been targetting in March of this year, and even exceeded the $433 million that the organisers had best estimating in late June.

With the China Logistics Property IPO now in the rear view mirror, Asia’s shed watchers are already anticipating the reported upcoming IPO of regional player e-Shang Redwood (ESR). The new company was formed when e-Shang and Singapore’s Redwood Group finalized a merger in January of this year that made it one of Asia’s biggest warehouses developers.

Prior to the completion of the deal, e-Shang revealed plans to raise $1 billion via an IPO in 2016, but sources familiar with the company’s plans say the offering for the combined company could be much larger than that earlier plan. The newly formed warehouse developer has interests in Mainland China, Korea and Japan.