Swire Cold Chain’s Guangdong facility was part of the sale to Vanke
Top three mainland developer China Vanke had a busy month in July, spending more than RMB 25.4 billion to add 33 new real estate projects around the country as it pushed to expand its land bank via project acquisitions in Shanghai, Dongguan, Hangzhou and other locations.
Along with the developer’s purchase of land for residential, office and retail development, however, Vanke also expanded its logistics holdings in China by purchasing Swire Cold Chain Logistics from Hong Kong-listed Swire Pacific for just less than RMB 2 billion ($291 million).
With the RMB 1.998 billion acquisition of Swire’s set of refrigerated shipping facilities, Vanke, which had already begun establishing a cold chain division of its logistics business, vaults into the ranks of China’s 10 largest temperature-controlled storage providers.
Keeping China’s Major Cities Fresh and Tasty
Vanke and Swire Pacific officials at the signing ceremony on July 9th
The cold chain transaction gives Vanke seven facilities covering 290,000 square metres of net lettable area, nearly all of which were built within the last five years, according to sources at JLL, which brokered the deal on behalf of Vanke.
Vanke’s new acquisition gives it cold chain assets in the first tier cities of Shanghai and Guangzhou, along with Nanjing in Jiangsu province; Chengdu, Sichuan; Xiamen, Fujian; Langfang, Hebei and the port city of Ningbo in Zhejiang. Swire owns a 60 percent stake in the Guangzhou operation and has 65 percent of its Xiamen business, with all other entities in the portfolio wholly owned by the Hong Kong company until the conclusion of this latest transaction.
The acquisition was celebrated at a signing ceremony in Shenzhen on July 9th, with Swire Pacific chairman Merlin Swire and Tim Blackburn, CEO of the company’s China operation attending, along with Vanke chairman Yu Liang, and Jiang Wei, general manager of Vanke Logistics.
Vanke Adds Swire Client Lists to New Business
While Swire’s attempt to make some hot profit from providing refrigerated logistics services to companies shipping fresh food, pharmaceuticals and other perishables is understood to have brought disappointing results, Vanke leaders indicated that by combining Swire’s facilities, and the company’s existing client list, with its own logistics holdings, the company is enthusiastic about becoming one of China’s leading cold chain service providers.
Stuart Ross of JLL China
Previous announcements by Swire Cold Chain Logistics have highlighted its work handling New Zealand fruit brand Zespri’s shipments of kiwi fruit in China, as well as receiving an award for its services from New Zealand’s Fonterra dairy.
At the event, Vanke officials pointed out that the logistics acquisition will enhance the company’s ability to serve first-tier markets in China, along with core port cities, including delivering one-stop warehousing and distribution service, according to a statement by the company.
Cold Chain Sector Heats Up
While Swire had struggled to squeeze a profit from its mainland cold chain operation, Vanke saw the assets as an attractive target as soon as they became available on the market.
As competition for mainstream logistics business continues to grow on the mainland, more specialised industrial niches are getting closer attention from investors looking for high levels of return.
“There’s such limited supply in logistics that there are fewer opportunities and more players entering the market, so investors are looking into areas like cold chain, like data centres, like last mile facilities,” Stuart Ross, head of industrial services for China at JLL told Mingtiandi.
Although Vanke took a leading stake in GLP’s 2017 management-led buyout the developer is still fairly new to the logistics world, having formed its own warehouse unit in 2015. Vanke Logistics now has projects in some 36 Chinese cities with projects completed or in the pipeline now totalling 6.8 million square metres according to the company.
Buying a Cold Chain Business
“This business was a perfect fit for Vanke,” Stuart Ross, head of industrial services for China at JLL told Mingtiandi. “They have been building their cold chain for 12 to 18 months, and could immediately achieve scale.”
Ross, whose team represented Vanke in the acquisition, noted that in addition to providing services to Swire’s existing clients, Vanke will be able to leverage the up-sized cold chain business to better serve restaurant and food retailers in its growing retail portfolio.
Vanke bought the SCP shopping centre portfolio from Blackstone in July 2016 for $1.9 billion, and then acquired 20 mainland malls from CapitaLand in January this year in a RMB 8.37 billion deal.
Vanke Buys as Swire Sells
Even before being combined with Vanke’s fledgling cold chain business, Swire Cold Logistics had ranked tenth among China’s largest cold chain providers in terms of area for lease, with 540,000 square metres in facilities at the end of 2016. That compares with the 1.92 million square metres held by industry leader Xianyi Supply Chain at the same interval.
In addition to selling its mainland cold chain business, Swire Pacific sold the Australian unit of Swire Cold Storage to US refrigeration technology company Emergent Cold last December in a deal that also included the company’s Vietnam operations, according to a report in the Australian Financial Review.
According to Swire Cold Chain Logistics website, the China operation is part of Swire Cold Storage, which the company says is the world’s 3rd-largest cold chain logistics operator by capacity, with operations in the US and Sri Lanka, in addition to the recently sold Australia, China and Vietnam businesses.
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