Less than three months after completing a HK$14 billion ($1.8 billion) IPO, ESR continues to raise cash for further expansion, as the logistics developer and fund manager today unveiled a joint venture with Singapore’s GIC.
Warburg Pincus-backed ESR Cayman announced that the two partners are making a $500 million equity commitment to the new vehicle, which will focus on developing institutional grade logistics facilities in key cities across China.
Details of the equity ownership in the venture were not disclosed and the transaction remains subject to regulatory approval.
The joint venture marks the second time that GIC has backed ESR’s efforts to develop new projects, following an earlier cooperation in Japan. The deal also marks the third announcement of a major investment in warehouse real estate by the Singaporean $100 billion fund within the last month, following earlier commitments in Australia and Europe.
Betting on E-Commerce Demand
“We are excited to extend our partnership with GIC, riding on the successful collaboration the two companies have built in Japan,” said Jeffrey Shen, co-founder and co-CEO of ESR. “This second partnership with GIC is a testament to ESR’s solid capability and track record of developing best-in-class logistics facilities in prime locations across China.”
The company which Shen helped to found in Shanghai in 2011 had 6.62 million square metres (71.26 million square feet) of warehouse facilities in China as of 30 June, with total assets under management in the country totalling $4.39 billion at the same milestone.
With China’s world-leading retail e-commerce sales estimated to have totalled $1.94 trillion last year with market research firm Emarketing expecting that number to grow to over $4 trillion by the end of 2023, the ESR team is confident in the need for more logistics facilities to help move all those packages.
“As home to the world’s biggest e-commerce market, demand for logistics properties will continue to thrive in China as infrastructure such as modern warehousing will be a backbone of the new economy, serving the online and offline needs of retail businesses,” Shen commented.
ESR Continues APAC Expansion
For ESR, the $500 million joint venture with GIC comes just one month after the logistics specialist announced an office mandate in Australia expected to raise A$138 million (then $94 million). ESR Office Partnership IV, offers investors a slice of a set of business park assets in Sydney and other parts of Australia’s east coast which the developer had picked up in the course of a set of acquisitions which established its $1.3 billion presence down under.
ESR has yet to specify which investors may be participating in its Aussie office venture.
In addition to its Australian initiative, Indian developer GMR Infrastructure last week informed regulators that one of its subsidiaries had entered a joint venture with ESR to invest 5.5 billion rupees ($77.6 million) to develop a logistics and industrial park near the Hyderabad airport.
Through the joint venture, which will be 70 percent owned by ESR with GMR retaining a 30 percent stake, the two partners plan to develop a 66 acre (26.7 hectare) site in the capital of India’s Telangana state.
Also last week, ESR announced that it had leased 72,392 square metres in one of its Tokyo area warehouses to Amazon, and in late December the company was reported to be considering assembling a REIT listing of its Korean warehouses which could raise over $500 million.
GIC Chases Logistics Opportunities Globally
In GIC, ESR has found a partner which has shown a taste for warehouse assets globally.
Just last week the Singaporean fund was revealed to have paid A$366 million to boost its stake in a Australian logistics trust, with that capitalisation coming just over a year after it first set up the venture with Dexus REIT.
Following this latest investment, GIC will now own 49 percent of the unlisted vehicle, Dexus Australian Logistics Trust.
In mid-December, GIC made a still larger commitment to the warehouse world, agreeing to acquire a set of 28 European distribution facilities from Apollo Global Management for around €950 million ($1.1 billion).
The Singaporean sovereign fund had previously worked with ESR as one of two external investors in ESR Japan Logistics Fund III, Mingtiandi has come to understand. In May last year that Japanese fund closed on an initial JPY 70 billion (then around $630 million) in financing with the goal of developing logistics facilities from ESR’s pipeline in the Greater Tokyo area, Osaka and Nagoya.