China’s ecommerce industry drives much of the demand for warehouses
Since August last year global fund investors have poured more than $3.81 billion into China’s warehouse developers, seeking a share of the profits reaped from supporting the country’s rapidly growing retail and ecommerce sectors.
And the influx of money could provide windfalls for existing players in the industry.
Global Investors Buying into Local Players
Speaking to an audience of real estate investors at a conference in Shanghai recently, a representative of China’s largest private equity firm, CDH Investments said the company is looking for a way into China’s logistics real estate sector.
Asked if there were still opportunities available in the profitable industry, Terence Loh, an executive director with CDH said, “From our perspective we try to be looking for more platform related investments. We are looking for partners, where we can invest within their platforms.”
Any investment by CDH could follow the pattern already established by other local and international investment firms which have struck up deals with warehouse developers in recent months.
In late May Dutch pension fund asset manager APG Asset Management announced that it is committing up to $650 million to acquire 20 percent of China warehouse developer and operator e-Shang, and to set up a joint venture with the Warburg Pincus-backed startup.
While a sizable investment, the move by APG falls well short of the $2.51 billion investment that industry leading developer Global Logistics Properties (GLP) received from a consortium of Chinese investors including Bank of China Group Investment and private-equity firm Hopu Funds in February this year.
Even warehouse developers that previously struggled to execute in the market are successfully raising capital in the current environment.
During April Singapore’s Temasek Holdings and Hong Kong-based private equity firm RRJ Capital invested $250 million into China warehouse developer Yupei – the very same warehouse builder that had struck a $400 million deal during August last year with US private equity giant Carlyle Group.
Both companies were willing to structure deals with Yupei, despite the local developer’s previously failed partnership with US super-investor Sam Zell’s Private Equity International.
Equity too found its way back into the market during August last year when it announced a strategic partnership with Asia-focused logistics real estate fund The Redwood Group for expansion of Redwood’s logistics property platform in the region.
CalPERS Also Into Warehouses
At the same conference where CDH declared its interest in the warehouse sector, an executive with the second largest pension fund in the US said that it too is seeking to partner up with other funds that have already grabbed a chunk of China’s warehouse market.
Asked about having to compete with funds such as Singaporean sovereign wealth fund GIC and Canada’s CPPIB (Canadian Pension Plan Investment Board), Dr Ben Meng, Head of Asset Allocation for the California Public Employees’ Retirement System (CalPERS) said that his agency, which has $257 billion to invest, is seeking to join forces with regional and international players for China logistics deals.
“I really view them as our global peers,” Meng said when asked about GIC and CPPIB. “Part of my objective here is that I’m going to Singapore right after this to try to figure out some kind of club deal to join forces together with our global peers. We can provide capital and they can build a more diversified portfolio.”
GIC is a primary investor in GLP, which is based in Singapore.
Domestic Investors Targetting Logistics Too
The international players are not the only financiers to suddenly discover a love for large industrial buildings, as some of China’s biggest real estate investors have also recently announced plans to invest in warehouses.
China Vanke, which is the country’s largest real estate developer by sales, but made its fortune in residential property announced last month that it has set a goal of being the number two warehouse builder in the nation, after GLP. The Shenzhen-based firm has forged an alliance with US private equity firm Blackstone to pursue deals in the sector.
China’s largest private investment firm, Fosun, is also reportedly planning to raise two investment funds this year targetting opportunities in the country’s logistics real estate industry.
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