Allianz is contributing half of the equity for an initial $225 million capitalisation of a joint venture with Asian warehouse development specialist ESR to acquire logistics facilities in India, according to an announcement by the German insurer on Friday.
The 50:50 cooperative effort by Allianz Real Estate, the property investment and asset management arm of the Munich-based firm and Hong Kong-based ESR is expected to grow into a $1 billion platform managing warehouse assets across the south Asian nation, according to statements by both Allianz and ESR.
The announcement of the India joint venture came just two days after Allianz unveiled its acquisition of a 50 percent stake in a mainland China logistics joint venture, as the European firm, which currently manages $67.5 billion in property assets globally, seeks to reach its stated goal of having Asian investments account for 10 percent of its real estate investment allocation worldwide.
Allianz Learns to Love India Logistics
As Allianz grows its Asian portfolio it has targetted high growth markets including China and India as priorities and seems to have a taste for logistics assets.
“India’s logistics sector is coming of age,” Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate said in a statement. “The sector is benefitting from a lot of favorable trends, such as stellar consumption patterns, continued infrastructure spending, increasing transparency and the nation-wide implementation of a uniform indirect tax system.”
The partners say that their strategy centres on targetting tier one and “selective tier two cities” including Mumbai, Pune, Chennai, Bangalore, Hyderabad, Ahmedabad, Kolkata and National Capital Region (“Delhi”). Within these locations the joint venture partners expect to acquire “a blend of develop-to-core, forward purchases, and stabilized or stabilizing assets.”
The deal comes just over one year after Allianz had committed $100 million to ESR’s Redwood Japan Logistics Fund II (RJLF2), and follows earlier investments by Allianz in logistics properties in China and Australia before it announced this past week its acquisition of a 50 percent stake in a mainland portfolio owned by Italy’s Vailog and a fund managed by Hong Kong’s Gaw Capital.
Also just over one year ago, Allianz made its first major investment in the India market when it partnered with India’s Shapoorji Pallonji Group to establish SPREF II, a $500 million fund targetting office investments in top Indian cities including Mumbai, Bangalore, Hyderabad, Pune, Chennai, and the National Capital Region around Delhi.
Jumping in as ESR Expands India Presence
Allianz’ India announcement came out just one day after ESR had broken ground on its latest distribution centre, the 1.2 million square foot (111,000 square metre) ESR Chakan development in the western India city of Pune in Maharashtra state.
The new facility, and the investment by Allianz, are part of a move by a number of logistics developers to serve India’s rapidly growing demand for modern warehouses.
E-commerce revenue in India is expected to grow at an average annual rate in the coming years, expanding from $39 billion in 2017 to $120 billion in 2020, according to Indian government figures.
ESR has been racing to keep pace with this expansion with company representatives saying early this year that the developer would take control of 600 acres (242 hectares) of land across India during 2018. “We will build around 10-11 million square feet of land which will translate into 6-7 projects,” ESR India co-CEO Abhijit Malkani said in an interview published in Live Mint during March.
ESR Keeps Up Regional Growth
ESR’s India win comes less than two weeks after the company scored a victory in a battle to expand its Australian presence.
On November 12th, ASX-listed real estate investment firm Propertylink revealed a binding agreement with ESR that agrees to an offer from the Hong Kong-based warehouse developer and fund manager to buy out the stake that it doesn’t already own in the Aussie real estate firm in a deal that valued the company at A$723.4 million ($522.51 million).
The $1 billion India joint venture forms an addition to ESR Australian plan, after the company which was formed in January 2016 through the merger of two of the region’s fastest-growing warehouse developers, Shanghai-based e-Shang and Singapore’s Redwood Group had earlier expanded into Southeast Asia and Korea.
Following the India deal Allianz now has exposure to logistics investments across four countries in the Asia Pacific region, namely China, India, Japan, and Australia.