Fund manager ESR is buying into the Vietnam growth story by taking an equity stake in its local partner BW Industrial as part of a funding round which could raise up to $450 million for the Ho Chi Minh City-based shed developer.
“ESR’s strategic investment in BW marks a significant milestone for our business in Southeast Asia,” ESR co-founders and co-CEO’s Jeffrey Shen and Stuart Gibson said in a statement on Thursday. “Underpinned by strong growth fundamentals including rapid urbanisation, a fast-rising consumer class and the exponential growth of e-commerce, Vietnam is witnessing robust demand for logistics and industrial space with limited available modern space.”
In an announcement to the Hong Kong stock exchange, ESR said that it is purchasing over 168 million newly issued BW shares, or 10.89 percent of the issued charter capital in BW, for a total of just less than $207.8 million. The Hong Kong-listed firm may elect to subscribe to additional shares following that acquisition that will give it a no less than 15 percent shareholding in the company post-investment.
While the statement did not provide details of how the new funding would be deployed, or regarding how large of a role ESR played in the financing round, BW currently has several facilities under development in both Hanoi and HCMC, as it seeks to add to what the company terms Vietnam’s first and largest e-commerce and last-mile delivery logistics cluster around the southern mega-city.
“We are excited to partner with ESR where we can leverage our collective resources, experience, and relationships to cement our market leading position,” said BW chief executive Lance Li. “Looking forward, we will continue to explore further collaborations, either greenfield developments, acquisitions or joint ventures to accelerate our growth trajectory going forward.”
The equity investment was announced 21 months after Hong Kong-listed ESR formed a joint venture with BW to develop an industrial park outside of Ho Chi Minh City, which has since been completed.
Established as a joint venture with Vietnamese state-owned builder Becamex IDC Corp in 2018, BW now has around $2 billion in gross assets under management and markets itself as the country’s largest and fastest-growing pure-play logistics and industrial developer.
Li, who served as vice president of mergers and acquisitions and international business at ESR China before taking on the top role at BW two years ago, added that, “With the transformative shift of the manufacturing base to Vietnam as well as the rise of domestic consumption especially via e-commerce, BW is incredibly well positioned to deliver the critical New Economy infrastructure to support the long-term growth of Vietnam.”
Specialising in standard factories and warehouses that develops around Vietnam’s major cities, the five-year-old firm has a land bank of more than 8 million square metres and more than 2 million square metres of gross floor area in operation or under development. In addition to the fresh backing from ESR, BW said it is also gaining new cash from other partners in the funding round, without specifying names.
Over 85 percent of the company’s assets are in either HCMC or Hanoi, and BW is said to have established relationships with close to 200 tenants from over 20 countries, most of which are from the e-commerce, last-mile delivery or high-tech manufacturing sectors.
Vietnam on the Rise
ESR’s investment in BW marks the renewal of international commitments to Vietnam’s industrial sector after a Covid-19 interruptions in the last two years, as warehouse builders compete to serve manufacturers relocating from China and to leverage the country’s fast-growing economy.
“As we continue to extend ESR’s leading New Economy footprint in APAC, Vietnam will be an important and valuable market as it offers a fast and dynamic growing economy, scale, velocity of development and strong institutional investor interest,” ESR’s Gibson and Shen said.
In their joint venture with BW announced in May 2021, ESR is developing the My Phuoc 4 Industrial Park in Binh Duong province near Ho Chi Minh City. That 240,000 square metre (2.6 million square foot) project is already leasing both logistics and light manufacturing facilities.
Vietnam was one of the few economies globally which notched positive GDP growth through the pandemic in both 2020 and 2021, as manufacturers continued to look to the country’s young population and low labour costs for an alternative to China. Disbursements of foreign direct investment in Vietnam during the first nine months of 2022 were up 16.2 percent compared to the same period a year earlier to reach a record $15.4 billion, according to figures from the country’s Ministry of Planning and Investment.
With the gross merchandise value of the country’s e-commerce market expected to expand at compounded annual growth rate of 32 percent from 2021 through 2025, when it is projected to reach $39 billion, according to the World Bank, warehouse builders have been eager to expand their operations in Vietnam.
In February last year ESR’s Logos unit teamed with Manulife Investment Management to purchase a distribution centre in Dong Nai province, north of HCMC, which was valued at more than $80 million.
ESR’s archrivals at GLP have also been active in Vietnam, setting up their SEA Logistics Partners joint venture in the country, which broke ground on its first facility in 2021 in the northern port city of Haiphong.