Hong Kong-listed warehouse owner ESR teams with APG and GIC on $4bn warehouse investment fund

Aug 16, 2021 | News, SEAPEC

ESR Cayman, the largest Asia Pacific-focused logistics real estate platform, has entered into an agreement to launch its latest project in China with a potential investment value of up to $4bn, bolstering its strategy of investing in modern logistics facilities across China’s major cities.

The real estate group, along with Dutch fund asset manager APG Asset Management and Singapore sovereign wealth fund GIC Private, have committed an initial equity investment of $1bn.

The slated platform will create a fund to invest in modern warehousing and industrial mixed-use vehicles in China that will be sourced, developed and managed by ESR. APG and GIC are long-standing capital partners of ESR.

ESR has one of the largest logistics development pipelines in China’s three major economic cities: Shanghai, Beijing and Guangzhou. It manages a logistics real estate portfolio with $6.7bn in assets under management, and 8.5m square metres of gross floor area as of 2020. The new platform will be ESR’s fifth development in China.

Jeffrey Shen and Stuart Gibson, co-founders and co-CEOs of ESR, said the acceleration of e-commerce has been a key factor driving growth in the logistics market in China.

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“Structural shifts in supply chain management, and consumers’ shopping habits and lifestyle changes are reshaping the market. These trends are opening new development and investment opportunities to ESR and our capital partners as the demand for advanced, large-scale and well-located logistics assets becomes even greater.”

In 2020, two-thirds of tenants at ESR’s warehouses were from e-commerce businesses, an industry which boomed during the pandemic as more people shopped online. Continued growth in online consumption is driving further demand for warehousing, allowing groups like ESR to profit.

Global e-commerce sales surged by 25% in 2020 to $4.2tn, and are expected to grow a further 16% by the end of the year. China, with a population in excess of 1.4bn, possesses the world’s highest level of e-commerce penetration.

In late July, ESR said it was buying ARA Asset Management, Asia’s biggest real asset fund manager, for $5.2bn. The merger effectively created the world’s third-largest listed real estate asset.

ESR’s tenants include Chinese e-commerce giant JD.com, which accounts for 11.1% of its rental income. JD.com saw 39% net revenue growth in the first quarter of 2021 from the same time last year, as people flocked to e-commerce websites during the pandemic.

Source: South China Morning Post

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