Invesco Real Estate Buys China Warehouse Portfolio From ESR for $308M

Invesco Real Estate, the property division of the US investment management giant, is making its first bet on China’s warehouse sector by buying a portfolio of core logistics assets in the country from e-Shang Redwood (ESR) for over RMB 2 billion (about $308 million). Through the joint venture deal, Invesco’s real estate division will acquire a majority stake in the portfolio from the Asian logistics powerhouse.

ESR will keep an equity interest in the portfolio and will partner with Invesco’s asset management team to act as the project and property manager of the warehouses, according to an announcement by ESR. Through the deal, which marks ESR’s first joint venture on stabilized assets in China, the logistics real estate developer and operator aims to generate returns and recycle capital for future growth.

Although the announcement does not provide further details about the portfolio, Mingtiandi has learned that the assets in question are located in or around the Shanghai region. The transaction is expected to close by late October.

Invesco Kicks off Partnership with Asian Logistics Heavyweight

“Invesco’s global capabilities and reputation combined with ESR’s pan-Asia logistics expertise create a much stronger platform for our logistics real estate efforts in the region,” commented Jeffrey Shen, ESR co-CEO and co-founder in a statement. “In addition to this China transaction, we see many other ways to cooperate across the region with the goal of creating long-term value for our shareholders and investors.”

ESR currently owns, manages or is developing some nine million square metres of warehouse projects across China, Japan, Singapore, South Korea and India.

The joint venture logistics developer was created in January 2016 through the merger of Singapore’s Redwood Group and Shanghai-based e-Shang, which was co-founded by Warburg Pincus in 2011. Thanks to backing by leading institutional investors including APG, CPPIB, Goldman Sachs, and Morgan Stanley, ESR has built one of the biggest logistics platforms in the region, with $8 billion in assets under management.

Invesco Hopes to Grow With E-Shang Redwood

Invesco seems to be counting on ESR’s ability to continue its rapid growth, according to statements by representatives of the Atlanta, Georgia-based asset manager.

“Our team has already developed a strong working relationship with the ESR team and we look forward to growing our partnership with them,” said Cheng Soon Lau, Invesco Real Estate’s managing director for Asia Pacific in the statement.

NYSE-listed Invesco manages over $850 billion in assets worldwide and operates in more than 20 countries. The company’s property investment arm, Invesco Real Estate, has $64.8 billion in global real estate assets under management and has been actively investing in a range of real estate strategies since 1992.

Invesco joins a growing roster of international investors that see opportunity in China’s logistics property market, fuelled by the rising retail consumption of tens of millions of newly minted middle-class Chinese. According to global property consultancy JLL, institutional investors have set aside more than $10 billion to invest in China’s logistics real estate over the past four years.

Some of China’s biggest cross-border transactions this year have involved logistics, including the proposed $11.6 billion buyout of Singapore-based Global Logistics Properties (GLP) by a consortium of mainland investors in July, and sovereign wealth fund China Investment Corporation’s $13.8 billion purchase of Blackstone’s European warehouse platform Logicor, confirmed in June.

ESR Growing in China and Japan

While ESR did not specify which of its assets were being acquired by Invesco through the deal, the developer’s China portfolio spans 36 logistics properties in cities across the country. During 2017 the company is also said to have hired new management for a $100 million expansion into India.

The warehouse builder is also boosting its portfolio in Japan. In July, ESR unveiled a new 178,000 square metre project in the Osaka area, a five-storey, multi-tenant facility that is unique in featuring not only roof-mounted photovoltaic cells, but also an employee lounge area and a children’s daycare centre.