ESR Selling 9 China Logistics Assets to GIC JV for $730M

Warehouse giant ESR has agreed to sell a portfolio of nine industrial assets in China to a joint venture of the Hong Kong-listed group and Singapore sovereign fund GIC for $730 million.

The portfolio is 98 percent occupied and consists of completed assets with a total gross floor area of more than 873,000 square metres (9.4 million square feet) across regions including the Yangtze River Delta, the Greater Bay Area and Beijing-Tianjin-Hebei, ESR said Monday in a release. The transaction represents ESR’s largest-ever sell-down of self-developed balance sheet assets.

The JV is held to 90 percent by GIC and 10 percent by ESR, according to financial details disclosed in a separate filing with the Hong Kong stock exchange. The just-announced deal, which remains subject to regulatory approval, will bring the overall core portfolio managed by ESR with GIC to over 1.4 million square metres.

“We are very pleased to further expand our relationship with one of our longtime capital partners, with whom ESR has built a strong relationship and track record across strategies and markets,” said ESR co-founder and co-CEO Jeffrey Shen. “Despite some near-term macro and geopolitical headwinds, this transaction is a further validation that institutional investors are increasingly drawn to the compelling long-term income potential of well-located, premium quality logistics portfolios in China developed by ESR.”

Streamlining Assets

ESR said the latest disposal aligns with the group’s capital recycling strategy of transferring balance sheet assets into investment vehicles it manages and co-invests in.

In 2021, ESR sold down more than $800 million from its balance sheet, translating to over $500 million in net cash that was recycled back to the group.

In May of this year, ESR sold its 18.16 percent holding in China Logistics Property for $350 million in gross proceeds to fuel future growth opportunities, the group said. JD Logistics, a unit of China’s JD.com — a key investor in ESR — bought out CNLP last year in a $2.1 billion deal.

“With the completion of this sell-down, ESR Group is well-positioned to achieve another record capital recycling year as we seek to take advantage of increasingly more attractive pipeline opportunities across APAC and build on the strength of our integrated platform, balance sheet, capital partners and customers to deliver long-term sustainable growth,” Shen said.

ESR’s development pipeline in China amounts to 6.9 million square metres after the group reported record leasing in the country of more than 2 million square metres in 2021. The third-largest listed real estate investment manager globally, ESR has $140.2 billion in total assets under management.

Sheds Still in Demand

China’s logistics sector has stayed hot this year as the mainland’s COVID-19 outbreak and subsequent restrictions sent other asset classes into deep freeze.

Last month, SF REIT agreed to acquire a warehouse complex in central China for RMB 540 million ($81.2 million), as the Hong Kong-listed logistics trust seeks to enlarge its three-asset portfolio and expand its geographical footprint.

Mingtiandi reported in late May that the real estate investment arm of banking titan Morgan Stanley had bought a portfolio of four logistics assets in cities surrounding Shanghai from Singapore-based SC Capital Partners for an undisclosed sum.

Earlier in May, New World Development revealed plans to purchase six mainland logistics properties from a fund managed by Australia’s Goodman for RMB 2.29 billion, while retail-heavy Link REIT agreed to buy a portfolio of three warehouses in the Yangtze River Delta for RMB 947 million as the second-ever logistics acquisition for Asia Pacific’s largest listed trust.