Hillhouse Merges Black Kite into China Logistics Platform Gaolu

Hillhouse Investment is boosting its China logistics operation through a deal that merges industrial developer and manager Black Kite Property’s assets and management into the fund manager’s Gaolu Group warehouse property division.

Following the transaction, the expanded Gaolu Group has 30 projects spanning a total floor area of 3.1 million square metres (33.4 million square feet) under management, Gaolu and Black Kite said in a joint announcement. The combined entity will operate under Gaolu in mainland China, while future offshore business will use the Black Kite brand. Financial terms of the merger were not disclosed.

“The combination provides us meaningful scale in assets under management, team and capital partnerships,” Gaolu chief strategy officer Stephen Chu said. “With complementary capabilities now under one roof, we are better positioned to capture opportunities and wholistically deliver investment and asset management solutions to our trusted capital partners.”

Black Kite founder Richard Brooks will serve as Gaolu’s chief operating officer following the merger, where he will be responsible for development and asset management of the group’s property portfolio, business development, and new growth initiatives, the companies said.

Complementary Combination

Founded by Hillhouse in 2021, Gaolu had invested in Black Kite that same year. Brooks set up Black Kite in Shanghai during 2019, after serving as regional head of logistics for Asia Pacific at CBRE Global Investors (now CBRE Investment Management). The now 21-year industry veteran also has previous experience as general manager of property for Greater China at Australian industrial specialist Goodman Group.

“We are very excited at the prospect of working together as one platform and one team,” said Brooks. “The merger allows us to leverage each platform’s strengths in managing and growing our national logistics and industrial portfolio, as well as to better capture strategic growth opportunities going forward.”

Gaolu chief investment officer Jeffrey Hu, a former Morgan Stanley Real Estate and Warburg Pincus executive, will retain his role in the combined platform, while former Logos head of North Asia funds management Chu, who currently serves as Gaolu’s managing director of capital and strategic business development, has been appointed as the group’s chief strategy officer.

The merger was effective from 11 October, with the integration to be completed within this quarter.

“The merger marks a significant milestone for both companies,” said Hu. “We have worked with Black Kite side by side since the founding of Gaolu and are very pleased to be joining forces. As the two platforms are highly complementary in our business reach, team composition and capabilities, we expect minimal disruption to how we run our businesses and service our clients. We are confident that the combined platform will allow us to better deliver on our commitment to quality and position us well for our next phase of growth.”

Including projects under development, Black Kite’s portfolio includes seven logistics properties, according to the company’s website, including locations in the eastern China cities of Wuxi and Jiaxing, Jiangmen in Guangdong province and the northern China hubs of Jinan, Langfang, Tianjin and the Beijing capital region.

The merger comes after an August report by Savills showed trades of manufacturing, logistics and data centre assets declined by 16 percent in the 12 months through 15 June, compared to the same period a year earlier. CBRE predicted in an August report that industrial vacancy in China will reach a nationwide average of 21.6 percent by the end of this year, with all regions except Southern China continuing to face downward rental pressure.

Hillhouse Expansion

The Gaolu-Black Kite merger is the latest in a series of recent bets on Asia’s property markets by Hillhouse boss Zhang Lei and his regional team after the company closed on over $2 billion in equity for its first regional property fund in 2022.

Since that time, Hillhouse and its Rava Partners property division have expanded in Japan, India and Singapore, with Hillhouse and Rava Partners earlier this month having announced a tender offer to buy out the common shares in Japanese developer Samty Holdings in a deal which values the company at JPY 169 billion ($1.13 billion).

In September, Singapore-based industrial investor Logicap Management, which is backed by Rava Partners, formed a joint venture with Japanese property giant Mitsubishi Estate to develop facilities across key industrial hubs in India.

In March, Hillhouse joined a consortium of investors in a $672 million Series A funding round for GDS International, the overseas unit of Chinese data centre developer and operator GDS Holdings, with that company now operating in Hong Kong, Malaysia, Indonesia, Singapore, and Japan.

Last year, Hillhouse-backed EZA Hill, a Southeast Asia-focused industrial developer and fund manager, teamed up with China’s JD Property to acquire a set of five industrial facilities in Singapore from ESR-Logos REIT for S$350 million ($255 million).