Warburg Pincus is raising its bet on niche real estate assets in China, with an affiliate of the US private equity firm leading a RMB 1.5 billion ($227 million) round of financing for the country’s biggest car park manager, Sunsea Parking.
China’s largest furniture retailer, Warburg Pincus-backed Red Star Macalline, also joined in the investment round. As part of the deal, the Hong Kong-listed firm will grant Sunsea Parking the rights to operate the parking lots of its more than 200 furniture outlets and shopping malls across the country.
The move by Warburg Pincus, an enthusiast for alternative assets in China from rental housing to logistics properties, comes two years after Hong Kong-based private equity shop LimeTree Capital bought an 80 percent stake in Sunsea Parking for $42 million.
Sensing Opportunity in China’s Lack of Lots
In a statement on Tuesday announcing the deal, a Warburg Pincus executive noted that the rapid rise in private car ownership in China has outstripped the country’s supply of parking spaces – with Beijing, for example, having one-third as many parking bays per car as Hong Kong.
“Such supply imbalances make this an opportune time to partner with China’s leading car park operator,” said Joseph Gagnon, the investment firm’s managing director and head of real estate for Asia.
Formed in 2006, Beijing-based Sunsea Parking touts itself as China’s only car park management company with a national presence, overseeing around 200,000 parking spaces across 40 cities for leading developers Dalian Wanda Group and China Vanke, state-owned food giant COFCO, and others.
Sunsea managed 100,000 parking spaces when LimeTree Capital, saying that car parks as an investment class were “notably undervalued and overlooked,” purchased an 80 percent stake in the company in November 2015. The private equity house closed its first China Car Parking Investment Fund at $340 million the previous year.
“Parking assets will become the next most attractive real estate asset class because it generates steady cash revenue with potential of further financing options such as REITs,” commented Liang Yan, chairman of Sunsea Parking in this week’s statement.
Warburg Pincus Builds Alternatives Portfolio
Global investors are hungry for alternative property types in Asia as vast amounts of liquidity chase a limited set of assets, driving down returns. Warburg Pincus has helped define the trend toward non-traditional assets in China, as the New York-based firm has poured over $3 billion into more than 20 domestic real estate companies, many of them focussing on niche or emerging sectors.
Among its other plays, Warburg Pincus co-founded Shanghai-based rental housing platform Nova Property Investment with an initial commitment of $173 million in 2015, adding another $183 million this past September. The company also partnered with China’s Avic Trust last year to bet nearly $300 million on Shanghai-based rental residence operator Mofang Apartment.
Warburg Pincus, which has over $44 billion in private equity assets under management globally, is also an active player in China’s booming warehouse market, having teamed up with Sun Dongping and Jeffrey Shen to found logistics developer e-Shang in 2011 – now part of regional logistics platform e-Shang Redwood. Warburg also worked with Sun Dongping to set up industrial developer D&J China in 2014.