Logistics investment’s long and winding road in Asia found the fast lane last year as the pandemic and surging e-commerce promoted once-niche warehouse properties to the status of essential infrastructure, two experts in the field told MTD TV on Thursday.
In a spotlight interview to kick off the Asia Logistics Investment Forum 2021, Mingtiandi founder Michael Cole welcomed Ivanhoe Cambridge senior vice president George Agethen and Logos founder and co-CEO Trent Iliffe. The long-standing partners discussed the logistics sector’s key themes, including sustainability initiatives and data centre opportunities (and how to avoid conflict between the two).
Iliffe began the hour-long session, which was sponsored by Yardi, with the observation that the COVID-19 crisis had accelerated trends foreseen by warehouse developer Logos for a long time.
“The pandemic did obviously make some pretty big structural changes in the way we shop,” said Iliffe, who set up the Australian firm in 2010 with partner John Marsh and now enjoys backing from global fund managers like Canada-based Ivanhoe Cambridge and Singapore’s ARA Asset Management. “The fact that we’re 18 months almost into this now, it really has changed the patterns of shopping around the world and particularly in Asia.”
Agethen made his first industrial acquisition, in Australia, 16 years ago when cap rates of 11 percent could still be had. Now conditions have reset to the point that Blackstone sold its Milestone portfolio to an ESR-GIC joint venture in April at an investment yield of 4-4.5 percent.
The difference has been a rush of capital into warehouse investments as urbanisation and growth in consumption has made logistics assets must-have investments for fund managers such as Ivanhoe Cambridge, the real estate investment unit of Quebec’s biggest pension plan.
“We had a strategy to increase our footprint in logistics in a more direct sense across the region, we did our market screens, we spoke to many managers, and we found Trent and John some six years ago, seven years ago,” said Agethen, a Logos board member. “That conviction, that trust in partners, then the roll-out of the portfolio and the performance of the portfolio, gives us the confidence to keep going.”
Iliffe and Agethen reminisced about working together since 2015, when Logos was a scrappier player with assets mostly in Australia and China — a far cry from its current presence in nine countries around the region. The developer approached Ivanhoe Cambridge to offer a slice of the startup, which had already secured backing from Singapore sovereign fund GIC and private equity titan Blackstone.
“It was certainly me knocking on their door,” Iliffe recalled. “When you start a business, I can tell you, there’s a lot of door knocking, a lot of begging for money. Almost I think I was down on my knees: ‘George and Ivanhoe, will you please partner with us?’ It’s a journey that takes you a long time to prove yourself.”
“I felt bad for him on his knees,” Agethen joked. “In all seriousness, given the way we invest and the long-term nature of how we like to invest, choosing a partner probably means more than the actual assets themselves. We felt very strongly that these were people we could trust.”
Cold Storage for Data
Fresh off the announcement of Logos’s first-ever data centre, Iliffe spoke of his initial mixed feelings about the sector and how his thinking evolved over time.
“Three or four years ago, when we were talking to some of the large data centre operators coming into our logistics development sites, I was reluctant to do it,” he said.
Over time, however, Iliffe and his team came to realise that modern industrial buildings could be repurposed for data centre use and provide rapid market entry for server facility operators struggling to meet demand. “The warehouse shell can be transferable, over time,” Iliffe said, “so a good example of that is the deal we’re doing in Jakarta that’s being developed in one of the ventures with Ivanhoe.”
He gave assurances that any data centres projects — notorious for their outsized energy consumption — would work hand-in-hand with the firm’s renewable energy solutions.
“We’re now looking to a path for, let’s say, 2025 where we’re building carbon-neutral buildings,” Iliffe said.
In the same vein, Agethen noted that Ivanhoe Cambridge takes a strict line on sustainability standards and environmental certifications for its properties.
“It’s no different to other obligations that we have in terms of what we want our portfolio to look like, not just now but when we decide it’s time to monetise,” he said. “It’s almost non-negotiable. You can quote me on that.”
Watch the full discussion above.
BW Industrial Up Next
The Asia Logistics Investment Forum continues on 30 June as MTD TV presents a spotlight interview with Dongwon Kwak, vice president of BW Industrial, as he discusses the factors driving demand for industrial space in the region and his predictions for the market post-pandemic.
BW, a joint venture between private equity firm Warburg Pincus and Vietnam’s largest infrastructure development corporation, Becamex, is the leading logistics and industrial real estate platform in Vietnam.
The logistics forum will resume on 6 July with a panel discussion on core logistics strategies in Asia Pacific, featuring BW Industrial chief executive Lance Li, JLL Asia Pacific capital markets chief executive Stuart Crow, SC Capital chairman Suchad Chiaranussati and Allianz Real Estate Asia Pacific chief executive Rushabh Desai.
A panel on development strategies on 13 July will feature BW Industrial director Michael Chan, JLL capital markets director Priyank Shah, Logos head of strategic customers Peter Garrison, and Jai Mirpuri of ESR.
The final session on 21 July will focus on logistics and e-commerce in mainland China, with appearances by Victor Mok, chairman and chief executive of the asset management platform for GLP China, Cushman & Wakefield head of investors services for Asia Pacific Dennis Yeo, and ESR China chief operating officer Zhou Bo.