ESR Sets Up RMB 1.7B China Logistics JV with Manulife

Logistics developer and fund manager ESR today announced a new joint venture with Canadian insurer Manulife, adding to its growing list of investment partnerships in 2020.

As part of the same announcement, ESR revealed that the new venture has completed a RMB 1.7 billion ($243 million) acquisition of a set of four stabilised logistics properties from an earlier development fund ESR had set up with Dutch pension fund manager PGGM.

The deal with Manulife adds to nearly $2.2 billion in new investment partnerships that ESR has announced so far this year, and marks the first time that the Hong Kong-listed firm has teamed up with Manulife, which manages around $900 billion in assets globally.

Core Portfolio Changes Hands

The ESR-Manulife joint venture is acquiring over two million square (186,000 square metres) of net lettable area across the four properties, which are located in Guangzhou and Dongguan in Guangdong province, as well as in the cities of Wuxi and Kunshan in eastern China’s Jiangsu province.

As of 30 June, the four assets were fully leased to a diverse mix of tenants, according to the statement. The joint venture is understood to be exploring the potential for further acquisitions, however, ESR representatives would not comment on any such plans at this time.

“We are excited about the new partnership with Manulife and the potential to grow this strategic relationship, not only in China but across other pan-Asian markets in which ESR operates,” Jeffrey Shen, ESR co-founder and co-CEO, and Charles de Portes, the company’s co-founder and president said jointly.

ESR announced the new China venture just two weeks after it had revealed an A$1 billion ($692 million) develop-to-hold logistics fund partnership in Australia with Singapore’s GIC. That deal with the sovereign wealth fund came after the developer in mid-June had announced the $1 billion closing of a Korean logistics joint venture with the Netherlands’ APG and Canada’s CPPIB.

In January of this year, the Hong Kong-listed warehouse specialist had unveiled a $500 million development joint venture with GIC, aiming to build new logistics facilities in key cities across China.

Early Partner Exits Fund

“These properties represent some of the highest quality locations and asset specifications in ESR’s stabilized portfolio in China, and are a reflection of our very successful and ongoing partnership with PGGM,” ESR’s Shen and de Portes said of the set of warehouses acquired by the new joint venture.

PGGM was one of the early backers of ESR funds, with the pension fund manager’s involvement pre-dating the 2016 merger which formed the company from Shanghai-based E-Shang and the Japan-focused Redwood Group.

Just a few weeks after that merger, PGGM brought its total investment in ESR initiatives to $430 million, through its third major investment in the company’s ventures.

“The disposal of assets is in line with our strategy to realize profits on some of our completed and stabilized China development assets as we continue to build a strong track record in our China investments,” said Thijs Schoenaker, director of private real estate for Asia Pacific at the Dutch institution. “PGGM has strong conviction in the continued promising growth of the logistics property sector both in China and globally.”

Manulife Builds APAC Real Estate Portfolio

While PGGM is cashing out of the four properties, Manulife is making its first standalone investment in China’s industrial property sector.

The firm’s investment in the joint venture, which comes less than a month after it took on a logistics joint venture in Indonesia, brings Manulife’s real estate portfolio in Asia Pacific to 4.9 million square feet, according to the statement.

“We are thrilled to partner with ESR on our latest real estate investment in China,” said Kenny Lam, senior managing director and head of Asia real estate investments at Manulife. “Industrial properties continue to be a favorable asset type to us globally given its defensive nature and strong growth potential.”

In their Indonesian initiative announced last month, a unit of Manulife had teamed up with Singapore’s Alpha Investment Partners and Indonesian warehouse specialist PT Mega Manunggal Property Tbk (MMP) for a $200 million logistics investment focused on Jakarta.

That JV was set up to acquire stakes in three single-tenanted properties and one multi-tenanted logistics facility in the Greater Jakarta area from MMP to create a seed portfolio with a total net lettable area of over 163,000 square metres (1.7 million square feet).