Hei Ming Cheng is getting into logistics for the first time
Warburg Pincus-backed real estate investment manager Kailong is teaming up with a Chinese state-owned firm to make its first foray into logistics properties.
Kailong signed a strategic partnership with Beijing Enterprises Real Estate, the property arm of state-owned Beijing Enterprises on Tuesday, Kailong announced in a statement. The duo will start by developing warehouses and will subsequently explore other sectors such as office buildings and business parks.
“Logistics have become very popular recently with a lot of market players entering the sector. We have seen a very fundamental problem in the market, which is, the demand for logistics properties is very large while supply is limited,” a representative of Kailong told Mingtiandi. “We wanted to enter the logistics market for a long time. This cooperation represents our first official entry into the sector.”
The cooperation will focus on the development and operation of warehouses, offices and industrial parks as well as cold chain logistics properties, which are also new to Shanghai-based Kailong. The representative of Kailong, which has previously focused on value-add business park and office development, said that the new partnership is still in its early stages, with the two parties still finalising specifics, including the size of the investment.
Kailong Taps SOE Partner’s Experience
A warehouse in Shanghai operated by Beijing Enterprises Real Estate
Beijing Enterprises Real Estate currently operates a set of three logistics properties, including projects in Shanghai, the northeastern city of Tianjin, and Quzhou in central China’s Sichuan province. The company also has a 563,999 square metre logistics project under construction in Beijing’s Tongzhou District.
Parent company Beijing Enterprises engages in natural gas supply, water treatment and distribution as well as solid waste treatment, and its gas subsidiary is China’s largest supplier and services provider of piped natural gas.
“Beijing Enterprises is the biggest state-owned enterprise in Beijing and they are very resourceful in securing projects. They are also experienced in the operation of projects including logistics,” said the Kailong representative.
“As the markets for China’s logistics properties, industrial parks and other industrial real estate gradually mature, the return on investment [in these markets] becomes more attractive,” Qian Xu, chairman of the Beijing Enterprises Real Estate said in the statement. “We are pleased to have reached a strategic cooperation with Kailong. We hope to capitalise on Kailong’s expertise in global capital markets, understanding in the real estate market and innovative thinking for our company’s success.”
Kailong Partnership Expands Warburg’s Warehouse Exposure
Kailong’s venture into the world of warehouses gives US private equity firm Warburg Pincus still greater exposure to China’s warehouse sector through its affiliation with industrial developer D&J China.
The US private equity giant, which co-founded part of what is now regional logistics player ESR in Shanghai in 2011, joined with ESR co-founder and chairman Sun Dongping to found industrial developer D&J China in 2014. In 2016, D&J paid an unspecified sum to acquire a 40 percent stake in Kailong.
This week, ESR joined with Beijing Properties to set up an offshore fund which would acquire logistics projects in mainland China worth RMB 6.4 billion. The move came a day after ESR received a $306 million investment from Chinese e-commerce behemoth JD.com to expand its portfolio in mainland China.
Founded in 2004 by Hei Ming Cheng, Kailong has invested over $2.8 billion in 48 real estate projects, 28 of which have been exited, according to its corporate website. The company has raised five yuan-denominated private equity real estate funds totalling RMB 2.8 billion.
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