The real estate investment arm of Morgan Stanley has agreed to sell two Indian warehouse properties to Mapletree Logistics Trust, as the Singapore-listed REIT makes its first foray into the fast-growing market.
The two Pune-area facilities in western Maharashtra state are being acquired from Morgan Stanley Real Estate Investing and local automotive supplier Waterloo Motors for INR 4.55 billion ($62.7 million), MLT said in a filing with the Singapore Exchange.
Once completed, the deal will add 89,229 square metres (960,453 square feet) of gross floor area in India’s industrial heartland to MLT’s existing portfolio of 156 properties across Asia Pacific. Ng Kiat, chief executive of the trust’s manager, said the acquisition would position MLT to capture future growth opportunities in the region.
“Strong demand for logistics space is underpinned by a large, growing consumer market, rapidly developing e-commerce, India’s increasing importance as a major manufacturing hub in Asia Pacific as well as a severe lack of supply of Grade A warehouses,” she said.
In the Warehouse Zone
The facilities consist of KSH Infra Chakan Industrial Park 1, a set of four single-storey warehouse blocks in the Chakan special economic zone, and KSH Infra Talegaon Industrial Park 1, a set of two single-storey facilities in Talegaon Floriculture and Industrial Park.
KSH Infra Chakan Industrial Park 1 is located just over 15 kilometres (9.3 miles) east of the Talegaon Industrial Park facility, with both of the distribution centres within an area of Pune district that has become a magnet for major logistics developers.
The Chakan Industrial Park project is only 2.5 kilometres from IndoSpace Industrial Park Chakan II — a facility belonging to GLP’s Indospace joint venture. The project is also 5 kilometres from ESR Chakan 1, a 118,831 square metre distribution centre completed by the Hong Kong-listed heavyweight in the final quarter of 2019.
MLT’s purpose-built ambient warehouses are connected to key cities and transport infrastructure in the region — including Mumbai, Pune, Pune airport and Jawaharlal Nehru port — via the Mumbai-Pune Expressway, MLT said. The sheds will also enjoy access to Bangalore, Nashik, Nagpur and Hyderabad through the proposed Pune Ring Road, of which phase one is to be completed this year.
Morgan Stanley Real Estate Investing is selling its Pune assets just two years after making its first splash in India’s logistics sector in 2019 when it bought a majority stake in KSH Infra, a Pune-based warehousing and logistics park developer, for a reported INR 3.5 billion.
The transaction gave the American investment manager a controlling interest in KSH’s two logistics and industrial parks.
During the brief period that it managed the assets, Morgan Stanley’s team brought the properties to 98.2 percent occupancy with a tenant base comprising mostly multinationals such as vehicle makers Kawasaki and Hyundai. Those tenants are locked into leases which have a weighted average expiry of 2.2 years with built-in annual escalations.
MLT’s debt-funded acquisition is expected to generate a net property income yield of 7.4 percent with accretions at the distribution level. Upon completion in the second quarter, MLT’s aggregate leverage ratio is projected to reach 40.1 percent.
India in Style
Since Morgan Stanley bought into the Maharashtra state warehouse wave, India has seen a surge of logistics property investment by big foreign players driven by the country’s growing manufacturing and e-commerce industries.
ESR last week announced plans to invest $45 million to add a second phase to its Chakan project. The cash will go towards developing a 38 acre (15.4 hectare) site in the warehouse cluster into a new hub for light manufacturing and logistics operations in the west of the country.
That most recent deal comes after ESR and Singaporean sovereign fund GIC last December launched a $750 million joint venture to build and acquire industrial and logistics assets in India, seeded with a 2.2 million square foot build-to-core asset near Mumbai and Thane.
And private equity giant Blackstone, already India’s largest office landlord, could soon become the country’s biggest warehouse owner through the purchase of a 22 million square foot logistics joint venture, according to local news reports last month.
Having acquired more than 1 billion square feet of warehouses globally over the past decade, Blackstone was said to be offering $700 million to purchase Embassy Industrial Parks, a logistics joint venture between US rival Warburg Pincus and India’s Embassy Group, which partnered with Blackstone to launch the Embassy Office Parks REIT in 2019.