Leading Chinese institutional investor Ping An Real Estate has committed more than $300 million to invest in warehouse projects in Japan with logistics real estate platform e-Shang Redwood as fund managers continue their love affair with Asia’s distribution centres.
Ping An is making the investment through a programmatic joint venture with e-Shang Redwood that will allow the mainland financial giant to co-invest at a level of up to 50 percent in e-Shang Redwood’s pipeline of projects in Japan.
For Ping An, this is the second time in the last ten months that it has committed major capital to warehouse assets, and for e-Shang Redwood, the investment deal is the latest in a series of investment coups, since the company was formed by a merger of Warburg Pincus-backed e-Shang and Singapore-based Redwood Group in January of this year – a story which was first reported by Mingtiandi.
Logistics Continues to Pull in the Big Money
“Logistics is a stable real estate asset class offering institutional investors predictability and resilience of cash flow,” noted ESR capital officer Pierre-Alexandre Humblot in explaining the interest of Ping An Real Estate and other large investors in pursuing warehouse deals.
Ping An was driven by the same rationale when it committed up to $1 billion to a US joint venture warehouse investment platform with Denver-based Blumberg Investment Partners last October. Competing mainland insurer China Life took a similar tack in November 2015 when it agreed to take a $1 billion stake in Global Logistics Properties’ US logistics portfolio.
Low Vacancy Creating Opportunities in Japanese Warehouses
The main Japanese logistics markets of Tokyo, Osaka and Nagoya are currently experiencing low single-digit vacancy levels, according to ESR, and the company sees itself as poised to take advantage of this opportunity.
In March this year the developer and fund manager opened a 39,000 square metre warehouse in Japan’s Chiba prefecture, close to Tokyo, that was already 100 percent leased to Daiwa Co Ltd. At the same time, the company announced the signing of a 5-year lease for 75,000 square metres of warehouse space at its Kawagoe Distribution Center in Saitama prefecture.
Ping An has already committed to four co-investment projects with ESR in Tokyo and Nagoya, according to an ESR statement, and the company is said to have a pipeline of projects to be started in the next 12 to 18 months that is worth over $1 billion.
The investment by Ping An would be the second major new investment in ESR this year, after Dutch pension fund manager PGGM put another $160 million into a China fund managed by the firm in January of this year, just after the e-Shang Redwood merger.
ESR Cashes Up as Competition Increases
For ESR the new cash could be welcome as the growing appeal of Asia’s logistics real estate begins to make the sector look more crowded.
Just last week Carlyle-invested China Logistics Properties announced that it was planning a $433 million Hong Kong IPO this month and Logos Property also expanded its Australia and China-based platform into southeast Asia during June. Anbang Insurance is reported to be a cornerstone investor in that IPO.
ESR could even find the market crowded in Japan with Global Logistic Properties (GLP) and the Canada Pension Plan Investment Board (CPPIB) having announced in February that they would invest another $2 billion in Japan’s warehouse market over the next three years. Australia-based Goodman is also active in the country, having opened a 116,000 square metre first phase of a $1.5 billion logistics project in Chiba Prefecture during April.