Warburg Pincus-Backed ESR Resumes Buying Spree With China, India Warehouse Deals

Fresh from completing the $5.2 billion acquisition of Singapore-based ARA Asset Management in January, ESR Cayman is continuing to expand with the purchase of a warehouse portfolio in the greater Shanghai area and building of a logistics facility in India as it seeks to tap booming demand from e-commerce firms.

Last week, Hong Kong-listed ESR and its longtime capital partners completed the acquisition of a portfolio of 11 logistics and industrial properties in the Yangtze River Delta region that spans Shanghai and the nearby cities of Suzhou and Hangzhou, bulking up exposure of so-called new economy assets such as warehouses that support e-commerce.

“This acquisition further cements ESR’s strong position in China as we continue to expand our network of strategically located best-in-class new economy assets across the country,” Jeffrey Shen, ESR cofounder and co-CEO, said in a statement on Thursday. “This also demonstrates our ability to capture compelling business opportunities for our capital partners who are eager to increase their exposure to new economy real estate where they remain significantly underweight.”

The Shanghai deal comes on the heels of ESR’s announcement on February 3 that it is developing its first in-city distribution center in Delhi following the acquisition of an 8.2 acre (33,184 square meter) in the Indian capital. The Delhi logistics facility will have about 300,000 square feet (27,870 square meters) of space to support grocery e-commerce, healthcare delivery services and cloud kitchens when completed next year.

“In-city distribution real estate is still at a nascent stage where availability of institutional grade facilities within key metros has been a major concern for our tenants,” Abhijit Malkani, CEO of ESR India, said in a statement. “We wanted to address this by being one of the early movers through the acquisition of our first in-city site in the capital.”

While ESR has been making inroads in the Indian logistics property market in recent years, its portfolio of $1.5 billion worth of assets in the country is dwarfed by the over $13 billion of assets under management in China, one of the company’s key markets.

The acquisition of the Shanghai warehouses—with a gross floor area of 550,000 square meters—is a rare opportunity in the closely held market, Shen said. “The portfolio has several projects with strong value-add potential, which will be optimized by ESR as our highly experienced team leverages its deep local knowledge and our robust ecosystem of customer relationships.”

The transaction represents the largest ever portfolio of logistics and industrial properties sold in and around China’s largest city, according to ESR. The company didn’t disclose financial details but real estate website Mingtiandi reported the assets were bought from US-based DLJ Real Estate Capital Partners at over 4.4 billion yuan ($692 million). Property consultant JLL was the adviser on the deal.

“Investors are aggressively on the hunt for scale when deploying capital into this asset class,” Theodore Novak, executive director and head of institutional capital markets in greater China at JLL, said by email. “The successful completion of this deal is indicative of the appeal of portfolio transactions to instantly enhance assets under management in one of the world’s most important logistics markets.” 

ESR—which counts New York-based private equity firm Warburg Pincus, Chinese e-commerce giant JD.com, Singapore tycoon John Lim and billionaire Chew Gek Khim’s Straits Trading as major shareholders—was among the most active investors in logistics properties in 2021. The Hong Kong-based company stitched together more than $10 billion worth of deals, including the purchase in April of a portfolio of warehouses across Australia from Blackstone for A$3.8 billion ($2.8 billion). Global investors poured a record $48 billion of capital into logistics investments in Asia Pacific last year, compared with $32 billion in 2020, JLL said in a report published last week.

The Shanghai and Delhi transactions bolster ESR’s position as the biggest real estate manager in Asia Pacific. The company manages about $140 billion worth of assets in 28 countries around the world, including $59 billion of new economy assets in the region.