LaSalle Investment Management has raised $681 million for a China warehouse development and management fund, as the JLL affiliate seeks to capitalise on growing demand for logistics facilities on the mainland.
The Chicago-based fund manager announced the first closing of LaSalle China Logistics Venture (LCLV) early Friday, and has seeded the investment vehicle with two development sites in the Shanghai area, supplemented by one stabilised asset each in Tianjin, Wujiang in eastern Jiangsu province and Huizhou, in southern China’s Guangdong province.
LaSalle first began raising cash for the fund in the second quarter of 2019 with earlier reports indicating a target capitalisation of $1 billion. The company declined to give a target date for a final closing of the fund.
“With LCLV, we are responding to strong investor appetite for quality logistics assets,” Mark Gabbay, CEO for Asia Pacific at LaSalle said in a statement. “The quick completion of our first close is a testament to our strong track record and to the attractive returns available in the logistics sector in China.”
Profiting From E-Commerce Growth
The company, which has made $4 billion of logistics investments in Asia to date, sees the opportunities in China’s warehouse real estate sector as being driven by the increased spending by mainland consumers, and in particular, the revolution in online shopping.
“Growth in domestic consumption, and e-commerce in particular, will continue to boost demand for modern logistics properties, Claire Tang, Head of Greater China at LaSalle Investment Management, said in the company statement.
In June of 2019 Tang’s team announced that it had broken ground on five new distribution centres in China that are expected to add 359,000 square metres of space to its mainland portfolio within this year. LaSalle manages its own chain of warehouse facilities under the Logiport brand with the five new projects slated to be operated as part of that network. The company indicated that the assets under the new fund may also qualify to become part of the Logiport system.
LaSalle’s faith in the potential of China’s logistics sector is bolstered by ongoing growth in the country’s e-commerce industry, which expanded by nearly 18 percent last year to reach $867.6 billion in transactions, according to numbers from economic data provider Statista. The same figures project online shopping to grow by an additional 33 percent by 2024.
Developing in China’s Top Logistics Hubs
The two development projects in LCLV’s initial portfolio are located in Jiaxing, just south of Shanghai in Zhejiang province, and Kunshan, an industrial hub west of east China’s largest city in Jiangsu.
The fund is targetting locations in first and second tier cities in China’s key logistics regions, including the Yangtze River Delta, the Bohai Bay area near Beijing, and Guangdong in southern China. The goal is to develop a diversified portfolio of distribution facilities in top markets in order to capture attractive development margins, according to LaSalle.
The company indicates that its previous logistics ventures in China, where it has completed more than $1.5 billion in warehouse deals since 2008, have achieved opportunistic levels of return.
For the new fund, LaSalle has accumulated a significant pipeline of development projects in its target markets, according to a company spokesperson, with LCLV also aiming to acquire and reposition under-performing logistics assets.
In addition to traditional distribution centres, LaSalle is targetting a portion of the LCLV fund at cold chain logistic projects, betting that rising demand from China’s fresh food sector will deliver enhanced returns. Of the three mature assets seeded into the fund, LaSalle’s team intends to convert a portion of two of these projects for cold chain use.
Attracting Global Institutions
The new fund is the first time that LaSalle has launched a China-specific warehouse vehicle, with the company indicated that its track record with logistics projects on the mainland, supported by in-house logistics expertise, created the platform for LCLV.
The investment vehicle attracted subscriptions from sovereign wealth and pension funds, as well as corporate investors, according to a company spokesperson, with entities from Europe, the Middle East and Asia signing up.
The company indicated that favorable supply and demand fundamentals, alongside forecasts of steady growth in logistics rents, made LCLV an attractive product to bring to market.