Sam Zell’s Favorite China Logistics Developer Gets $144M Investment From PGGM

Logistics fund manager The Redwood Group this week announced an agreement with Dutch pension fund service provider PGGM that will pour $144M into the group’s warehouse development projects in China.

The investment by PGGM’s Private Real Estate Fund is the second time that the Dutch firm has invested with Singapore-based Redwood and brings the Dutch firm’s total commitment to the China-focused fund to $280 million, according to a joint statement from the two organisations.

In the statement, Thijs Schoenaker, Senior Investment Manager with PGGM, explained the firm’s decision to double its bet on Redwood and the China logistics as follows: “This additional commitment fits to PGGM’s policy to invest more capital with a limited number of strategic partners including Redwood. As a result, we are able to get access to high quality and sustainable investments, reduce costs and increase control over our investments across our global private real estate portfolio.”

Redwood, which last year partnered with Sam Zell’s Equity International, has set up its China fund to invest in distribution and logistics real estate facilities, taking advantage of the gap between the country’s rapidly developing retail sector and its woefully inadequate supply of international quality warehouses.

In a joint comment on the new partnership, Redwood Asia President Charles de Portes along with the company’s Managing Director for China, Oliver Treneman said, “We are pleased to further strengthen our well-established relationship with PGGM, a strong and experienced investor in the China commercial real estate market.”

The investment by PGGM, which has EUR 167 billion (US$227.2 billion) in assets under management, marks the second time in less than two months that a Dutch pension fund manager has taken a position in China’s logistics real estate market. In May APG committed to investing $650 million into Warburg Pincus-backed warehouse development startup e-Shang.

Fund Managers Prefer China’s Warehouse Sector

There has been a rapid influx of new capital into the market recently, with global fund investors pouring more than $3.81 billion into China’s warehouse developers since August last year. These money managers come seeking a share of the profits reaped from supporting the country’s rapidly growing retail and ecommerce sectors.

According to data from China logistics real estate platform RightSite.asia, international investment funds have committed more than $4 billion into China’s logistics real estate sector since August last year, as investors look for opportunities to profit from the sector’s strong (8.5 to 9 percent average) development yields.

Just last week Stephen Schwarzman, CEO and Chairman of private equity giant Blackstone praised the potential of China’s warehouse property market while visiting Beijing. “Industrial warehouses in China are very interesting, and are set to benefit as Internet and retail sales increase,” Schwarzman told the China Daily.

Blackstone has said that it is pursuing a partnership with residential developer China Vanke to organise a China logistics fund of its own, while The Carlyle Group, Temasek Holdings and other foreign-investors have recently begun taking positions in the suddenly fashionable sector.