Singapore-based Alpha Investment Partners Limited has joined forces with a subsidiary of Manulife Financial Corporation and Indonesian warehouse specialist PT Mega Manunggal Property Tbk (MMP) for a new $200 million logistics investment in Jakarta, according to an announcement to the Singapore stock exchange.
The joint venture intends to acquire stakes in three single-tenanted properties and one multi-tenanted logistics facility in the Greater Jakarta area from MMP to create a seed portfolio with a total net lettable area of over 163,000 square metres (1,754,517 square feet).
The deal, which was originally agreed to in December of last year, comes despite Indonesia having been among the Southeast Asian nations hardest hit by the COVID-19 pandemic, as logistics investments continue to outperform other sectors in 2020.
Alpha Bets on Indonesia’s Middle Class
In their statement, Alpha, Manulife and MMP said the venture has received initial capital commitments of approximately US$93 million (IDR 1,376 billion) from its partners, which include PT Asuransi Jiwa Manulife Indonesia.
Top leadership at Alpha explained the investment as an opportunity driven by online shopping and the growing spending power of white collar consumers.
“With Indonesia’s growing middle-class population driving the rapid growth in consumption and e-commerce, coupled with the limited supply of modern logistics facilities in Jakarta, the Indonesian logistics property sector is seeing strong demand,” Alpha CEO Alvin Mah said. “The successful formation of the venture during a period of unprecedented market uncertainty is testament to Alpha’s ability to seek out quality investment opportunities and grow our capital platform.”
The four assets acquired by the joint venture have an average occupancy of more than 96 percent, the companies said, and serve established tenants in the consumer goods, logistics and e-commerce industries, including Unilever, Li & Fung and DHL.
Following the formation of the JV, Alpha will manage the venture’s investments, while IDX-listed MMP will serve as a strategic advisor to the Singaporean firm, as well as managing the properties, according to a release.
Warehouse Deal Weathers COVID-19
“By setting up this platform, MMP has just taken its first step in implementing an asset light strategy to recycle capital from its stabilised portfolio,” said MMP CEO Bonny Budi Setiawan. “We are very pleased to collaborate with Alpha and Manulife, two of the world’s leading institutions, as it will not only enable us to monetise our assets but also offer capital sustainability to support MMP in capturing opportunities in the growing modern logistics property market in Indonesia.”
The Indonesian warehouse developer, which had a property portfolio worth more than IDR 8.2 billion at the end of 2019, had to wait a bit longer than expected to realise the capital outflow from this latest transaction.
MMP shareholders had conditionally approved the sale of the set of properties to the new venture at a shareholders meeting on 20 December 2019 — nearly six months before the companies were able to announce their agreement today.
Despite the pause, Alpha, MMP and Manulife moved forward with the deal, with analysts noting the durability of the island nation’s warehouse sector, despite the toll taken by the pandemic. “COVID-19 has delayed the decision on investment deals, however there is still a strong interest for Indonesia market to enter Indonesia from private equity firms, new logistics developers, sovereign wealth funds and more,” said Farazia Basarah, head of industrial at JLL in Jakarta.
Warehouse Sector Set for Growth
In a report summarising the performance of the warehouse market near the Indonesian capital during the first quarter, JLL cited logistics as the “stand-out sector” on the Greater Jakarta real estate landscape, due to indications of further rent increases for distribution centres in the area.
Analysts at India-based Ken Research projected last March that Jakarta’s logistics industry was in its growth stage and would expand as government leaders bolstered investment in the nation’s infrastructure and demand for cold chain solutions rose to meet the consumption requirement of growing population.
The research firm predicted that Jakarta’s warehouse sector would register a compound annual revenue growth of 6 percent from 2018-2023.