China’s warehouse market continues to fill up with cash this week after a startup logistics developer announced a joint venture with Ivanhoe Cambridge and CBRE Global Investment Partners that could invest up to $400 million into China’s real estate market.
Logos China Investments Limited announced the partnership with the two fund managers on Tuesday, declaring that the new joint venture, which is named the LOGOS China Logistics Club, intends to own and develop “high-quality modern logistics properties located in key hubs serving large Chinese cities, particularly Shanghai.”
The joint venture deal is just the latest in a series of new capital commitments to China’s logistics real estate market by global financial players, as investors compete to cash in on the returns generated from the country’s demand for modern warehouse facilities.
Logos Joins the China Warehouse Capital Party
The new capital is potentially a major win for Logos, which was formed in 2010 by a group of industrial real estate veterans from China and Australia.
“This is an exciting next step in the growth of LOGOS in China,” noted John Marsh, Managing Director and Co-Founder of Logos. The former Goodman and Australand executive said, “Together with our new partners, Logos will seek to further expand on our existing specialist logistics real estate platform in China, and capitalize on our deep pipeline of new development and investment opportunities.”
In 2014, Australia’s Macquarie capital had already taken a strategic stake in the warehouse developer.
For Ivanhoe, the warehouse joint venture is the second new investment into China’s real estate sector this month.
“Our investment with Logos China supports our plan to grow our exposure to opportunities in the logistics sector in key markets such as Shanghai and Guangzhou,” explained Rita-Rose Gagné, Executive Vice President, Growth Markets, for Ivanhoé Cambridge.
Earlier in June the Canadian real estate fund manager, which is part of Montreal-based Caisse de dépôt et placement du Québec, joined with Dutch pension fund manager APG to invest $920 million in Shanghai commercial developer Chongbang Group. The group also has existing partnerships in China with developers Shanghai Forte Land (a subsidiary of Fosun) and Bailian Group.
CBRE Global Investment Partners is an independent division of real estate fund manager CBRE Global Investors. Macquarie Capital advised Logos China on the deal.
Gaw, Vanke and Logos All Invest in China Warehouses in June
While the Logos deal represents a significant influx of capital into China’s warehouse market, the $400 million JV, might not even be the biggest China warehouse deal during the month of June.
Just over a week ago, Gaw Capital Partners announced that it was partnering with Italian-based warehouse developer Vailog to invest at least $300 million, and up to $1 billion into China’s logistics real estate market.
Also in June, China Vanke, which has backing from the Blackstone Group, announced that it was launching its first two logistics projects in China, as the country’s housing giant seems to have found the rental demand for warehouses irresistible.
Despite the surge of new capital, China’s existing warehouse players seem sanguine about the rising level of competition.
An executive with The Redwood Group, which received $144 million in investment from Dutch pension fund manager PGGM last year told Mingtiandi that, “International grade projects in strategic locations are still being fully-leased out before completion, and we are seeing no fall-off in demand for space in those projects.”
China’s rapidly growing ecommerce sector, and the emergence of chain retail operators have helped to create double-digit investment returns on some logistics projects, as rental rates have climbed steadily over the last several years.