China’s second-largest e-commerce player has set up its own property fund management business and now has support from a US private equity giant and a mainland venture fund to grow that asset management venture, according to recent announcements.
JD Property, which was set up in 2018 to manage the online shopping giant’s warehouse portfolio, has entered into formal agreements with an investor consortium led by Warburg Pincus and Hillhouse Capital for around $700 million in funding to boost its property fund management business.
“By leveraging Warburg Pincus and Hillhouse Capital’s industry expertise and resources, JD Property will further strengthen its infrastructure property management capabilities and its position as a leading player in high-quality infrastructure properties development and operations,” JD.com said in its fourth-quarter and full-year 2020 results released late last week.
The announcement came just two weeks after JD announced plans for a potential $5 billion initial public offering in Hong Kong for its JD Logistics unit, which holds the assets managed by JD Property.
Fund Manager Born
“We have been deeply impressed by JD Property’s high-quality portfolio, unique capabilities and strong management team,” said Ellen Ng, managing director and head of China real estate at Warburg Pincus. “This investment demonstrates our conviction in the tremendous growth opportunity in new economy real estate and infrastructure as well as our ongoing commitment to investing in these sectors.”
Having previously launched a pair of core logistics funds, JD Property debuted its first development fund in the fourth quarter, with RMB 3 billion ($461 million) in assets under management. The online marketplace-turned-asset-manager counts Singaporean sovereign fund GIC and Abu Dhabi’s Mubadala Investment Company as key investors in the development vehicle.
With this latest venture, JD Property has a total of RMB 19 billion across its three funds.
JD’s first core fund was established in February 2019 with GIC acting as the primary investor in that vehicle. JD served as general partner and retained a 20 percent stake after selling RMB 10.9 billion in logistics facilities to the vehicle.
JD Logistics Properties Core Fund II was set up at the end of March last year when JD.com agreed to sell RMB 93.5 million in logistics properties to the vehicle, with GIC also acting as the primary backer of that fund.
Warburg Pincus and Hillhouse are backing JD’s acceleration of its fund management business after both of the investment firms spent years working with the e-commerce player from different angles.
JD is a significant shareholder in ESR, a Hong Kong-listed logistics real estate platform co-founded by Warburg Pincus. With a portfolio of more than 800 of its own warehouses in China, JD invested $306 million in ESR in 2018 and held 7.62 percent of the company’s shares as of 30 June 2020.
Should JD Logistics’ IPO move forward, it could value the company’s 20 million square metres (215 million square feet) of warehouses at as much as $40 billion. The public offering could potentially raise $5 billion, according to earlier media reports, which would eclipse ESR as Hong Kong’s biggest logistics real estate IPO ever.
Hillhouse was an early backer of JD Logistics, with the venture capital firm led by billionaire Zhang Lei having joined a consortium of mainland backers that invested $2.5 billion in the warehousing business in 2018.
The Beijing-based firm has increasingly turned its attention to real estate in recent months, with the company having hired former Blackstone and Soho China executive Yan Yan as a strategic advisor at the beginning of this year, according to an internal memo seen by Mingtiandi. Hillhouse had earlier been rumoured to be exploring a buyout of commercial developer Soho China.
In August, former Warburg Pincus managing director Joseph Gagnon reportedly joined Hillhouse to lead the firm’s establishment of a real estate investment division in the region.