ESR Raises $633M to Close Japan Logistics Fund

Pan-Asian logistics group ESR announced on Monday that it has closed on JPY 70 billion ($633 million) in funding for its ESR Japan Logistics Fund III (RJLF3).

The Warburg Pincus-backed fund manager and warehouse builder said that it raised the cash from a pair of partners, who have also reserved an option to expand their commitments to where, over time, it brings th  total investment capacity of the fund to as much as JPY 530 billion.

ESR, which filed for a Hong Kong IPO in March of this year, declined to name the participants in this latest round of fund raising, which it says provides the capital necessary to develop JPY 200 billion worth of logistics projects in Japan.

Targetting Tokyo, Osaka and Nagoya

Hong Kong-based ESR intends to put the new fund to work investing in large scale logistics facilities in the cities of Tokyo, Osaka and Nagoya, with the company having said previously that it sees Japan’s logistics sector will expand by 8 percent annually.

The company, which has operations in Korea, mainland China, Southeast Asia, Australia and India, in addition to Japan, has been building its presence in the land of the rising sun.

Last month, the company announced its plan to invest around JPY 35 billion ($314 million) in a new logistics facility in Toda, Japan. The new facility, called ESR Toda Distribution Centre, will be the company’s fifth property in Greater Tokyo’s Saitama prefecture managed by ESR, after RW Kazo DC, RW Kawagoe DC, RW Kawajima DC and ESR Kuki.

In late March, the Hong Kong-based warehouse builder acquired a parcel of land on Tokyo Bay for development of a $1 billion warehouse facility, which ESR said at the time will be developed into one of the largest master-planned logistics parks in Japan.

ESR Continues Asia Expansion

The announcement of the Japanese mega-project came two months after the logistics platform formed a new joint venture with France’s AXA Investment Managers and an unnamed sovereign wealth fund to acquire core logistics properties in Japan, starting with the purchase of six of ESR’s existing Tokyo and Osaka assets for around $1 billion.

The company, which grew from a 2016 merger between Shanghai-based e-Shang and Japan’s Redwood Group, currently has a portfolio of 18 Japanese logistics projects. It has previously established a pair of Japan-focused funds, Redwood Japan Logistics Fund, and Redwood Japan Logistics Fund 2, and counts PGGM, Ping An, Aviva and Mercer among the investors in its Japanese ventures.

ESR’s two co-founders Stuart Gibson and Charles de Portes also have had long experience in Japan’s logistics markets,including working with what was then Prologis — the predecessor to GLP — in Japan.

The company, which is led by co-CEOs Jeffrey Shen and Stuart Gibson, and was co-founded with Warburg Pincus, filed for an initial public offering in Hong Kong in March. The stock market listing is expected bring in at least $1 billion for the APAC-only logistics real estate play.

The IPO, scheduled within the next two quarters, is expected to be the biggest real estate stock debut on the Hong Kong exchange since Dalian Wanda’s $3.7 billion listing in 2014, according to Mingtiandi estimates.

ESR had assets under management in excess of $14 billion as of September 30^th, 2018, according to the filing.