Logistics Fund Redwood Leases Guangzhou Facility to Auto Maker Daimler

Logistics real estate fund The Redwood Group (Redwood) announced last week that it has entered into a 10-year lease agreement with auto-maker Daimler for a custom built distribution 36,000 square meter facility in Guangzhou, China.

The build-to-suit arrangement is the first collaboration between Daimler Northeast Asia Parts Trading and Services Co., Ltd. and Redwood in China. The site is located in the Conghua Economic & Technological Development Zone, Taiping District, Conghua City, Guangzhou.

The land site area for this class-A development project constitutes over 100,000 m2 (10 hectares) with a gross building floor area of approximately 36,000 m2 for the first phase of development. Redwood and Daimler have agreed a construction start by April 2014 with completion scheduled for mid 2015.

The single storey warehouse park will have a phase one footprint of 34,998 m2, and the site affords Daimler the opportunity of expanding in the future with the development of a second warehouse of some 13,000 m2.

Charles de Portes and Oliver Treneman (Group President and MD of Redwood China respectively) issued a joint statement: “We are very excited about this agreement with Daimler, a recognized world leader in the automotive industry. Incorporating best practices of structural design, safety and efficiency into the project, the execution of this large-scale lease agreement demonstrates the demand for Redwood’s strategically located, modern logistics facilities and the confidence of major domestic and international clients.”

This project will serve as the main parts distribution hub for Daimler in Guangzhou, which is the main manufacturing hub of the Pearl River Delta, one of mainland China’s leading commercial and manufacturing regions.

Warehouses Now Among China’s Hottest Markets

During 2013 warehouses and logistics development rapidly became one of China’s hottest real estate investments. This is due to a combination of high investment yields and rates of return on investment.

One study found that warehouse investments in China provide “development yields can be approximately 8.75% with a projected unlevered Internal Rate of Return of 14% for a 10 year holding period. This compares favorably to other property types (office and residential mostly) in China.

A report published by consultancy Jones Lang LaSalle in September 2013 found that the growth of China’s e-commerce market “makes the logistics sector the most attractive real estate opportunity in China.”

Redwood Looks to the South

Guangzhou, the capital and largest city of the Guangdong province is located on the Pearl River, about 120 km (75 mi) northwest of Hong Kong and is a key national transportation hub, trading port and southern China’s largest city.

The Redwood Group (Redwood), founded in 2006 by Charles de Portes and Stuart Gibson, invests in, develops and manages logistics real estate in the largest metropolitan areas of Asia, focusing on Japan and China.

Redwood is a strategic partner of the international investment firm founded and chaired by Sam Zell, Equity International.