America’s largest landlord has made the biggest-ever purchase of an industrial real estate asset in China, as Blackstone has agreed to acquire a majority stake in a Guangzhou logistics park for $1.1 billion, according to an announcement today.
Blackstone is buying a 70 percent share in Guangzhou International Airport R&F Integrated Logistics Park from Guangzhou R&F Properties, according to an announcement to the Hong Kong exchange. The developer is selling the 98 hectare (242 acre) project to opportunistic funds managed by the US giant.
The deal is the latest in a series of logistics real estate investments by Blackstone this year, and will boost the firm’s China logistics portfolio by a third. “Logistics remains among our highest conviction global investment themes and we continue to see strong momentum driven by e-commerce trends,” Justin Wai, a Hong Kong-based managing director with Blackstone Real Estate said.
R&F, which has been among the most aggressive borrowers among mainland China’s major developers, indicated that the sale was motivated in part by a desire to lower its gearing and pay down debt.
Mainland Developer Pays Down Debt
When completed, the Guangzhou facility is expected to yield a total of 1.2 million square metres (12.9 million square feet) of space, with some 889,820 square metres of leasable facilities already completed. An additional 14 hectares of land still remains to be developed.
R&F will retain a 30 percent stake in the project following the disposal, and will be receiving RMB 4.12 billion in cash from the disposal, on which the developer expects to book a RMB 1.5 billion gain based on a 30 September valuation of the property.
Primarily a residential developer, R&F said that, with its ongoing stake in the venture, it expects to benefit from Blackstone’s management of the properties and that the disposal will allow it to focus on its core business and reduce risk.
In August of this year, Chinese authorities introduced their “Three Red Lines” policy, which aims to take away access to credit from the country’s most indebted developers. Last month R&F raised HK$2.5 billion from the sale of new shares in the company on the Hong Kong stock exchange, and as of 30 June, the company had RMB 17.9 billion in cash on hand versus short term borrowings and current liabilities totalling over RMB 74.8 billion.
Guangzhou International Airport R&F Integrated Logistics Park is located 15 kilometres from the city’s airport and is home to tenants including logistics providers SF Express and YTO Express, and e-commerce titans Tmall and JD.com. Beyond the online shopping world the facility is host to some top mainland corporates including China Mobile, China Unicom, Sinopharm and China Resources Pharma.
Blackstone Expands in the Greater Bay
In explaining the rationale for its investment, Blackstone pointed to its belief in logistics opportunities globally, and the potential of the Greater Bay Area – a geographic construct which links the mainland’s Guandong province with Hong Kong and Macau.
“The Greater Bay Area is rapidly emerging as a financial, technology and transportation hub and one of China’s biggest logistics markets,” said Cliff Chen, a Shanghai-based managing directors with Blackstone Real Estate. “Our scale, expertise in logistics, and the support of dedicated teams on the ground enable us to drive our plans for the park’s future growth including constructing additional cold storage facilities and institutional-quality warehouses to cater to rising demand.”
In August of this year Blackstone agreed to buy $523 million in Japanese logistics assets from Daiwa House, adding those to a $920 million set of warehouses that the firm bought from Mapletree’s Japan portfolio last year.
In June of last year Blackstone paid $18.7 billion to buy GLP’s US portfolio, which gave it 179 million square feet of North American warehouses.
Following the deal, Blackstone’s China logistics portfolio will total 4.9 million square metres across 23 cities. Worldwide, the New York-based fund manager has acquired nearly 93 million square metres of warehouses since 2010.
Vacancy in Guangzhou’s grade A warehouse market stood at 15 percent at the end of June this year, with rents average RMB 39.6 per square metre per month, according to research by Savills, with the firm’s mainland analysts seeing Blackstone’s acquisition as part of a growing flow of institutional capital into the sector.
“Interest in the logistics sector has been strong for the last five or so years, but was boosted by an increase in ecommerce purchases in response to lockdowns in the first half of the year and the emergence of new business models and platforms,” said James Macdonald, head of research for China at Savills.
The property consultancy noted that with much of the available stock in the Guangdong capital slipping below international standards, occupiers were already looking to neighbouring cities such as Dongguan and Foshan to fulfill demand.