DLJ Lingang Logistics Park

The DLJ Lingang Logistics Park near Shanghai’s largest port is said to be among the assets

Warehouse giant ESR has acquired what it describes as the largest-ever portfolio of logistics and industrial assets to be transacted in Greater Shanghai.

The Hong Kong-listed firm bought the 11-asset portfolio for an undisclosed amount in partnership with a “leading global institutional investor”, which a person familiar with the deal has identified as Singaporean sovereign wealth fund GIC.

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The collection of completed assets spans 550,000 square metres (over 5.9 million square feet) of gross floor area across Yangtze River Delta cities including Shanghai, Kunshan, Suzhou, Taicang and Hangzhou, ESR said Thursday in a release. Sources familiar with the assets identified the seller as US-based DLJ Real Estate Capital Partners and indicated that the portfolio sold for in excess of RMB 4.4 billion ($692 million).

“A high-quality existing portfolio of this size, strategic location and value-add potential is a rare opportunity in the closely-held Greater Shanghai market,” said Jeffrey Shen, co-founder and co-CEO of ESR. “We are very pleased to collaborate with one of our long-time capital partners to secure this portfolio.”

Value-Add Play

Shen said the newly-acquired portfolio includes several projects with strong value-add potential, and he alluded to the purchase enabling ESR’s investment partner to fill a gap in its asset allocation strategy.

“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,” said Shen, who helped set up ESR with Warburg Pincus six years ago. “This also demonstrates our ability to capture compelling investment opportunities for our capital partners who are eager to increase their exposure to new economy real estate where they remain significantly underweight.”

ESR Jeffrey Shen

ESR co-CEO Jeffrey Shen

ESR, which last month completed its acquisition of Singapore-based ARA Asset Management, has $13.4 billion in assets under management in China and 2.5 million square metres of pipeline projects in the country. ESR representatives declined to provide further details on the portfolio or to confirm the participation of GIC or DLJ. Inquiries to DLJ and GIC had not received a response by the time of publication.

“The largest-ever logistics and industrial portfolio transaction in Greater Shanghai demonstrates that investors are aggressively on the hunt for scale when deploying capital into this asset class,” said Theodore Novak, head of institutional capital markets for Greater China at JLL, which along with Cushman & Wakefield was appointed to advise on the sale of the portfolio. “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.”

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In Shanghai, which has been a core strategic market for ESR, average warehouse rent in 2021 rose by 2.2 percent to RMB 1.53 ($0.24) per square metre per day as the vacancy rate fell by 2.4 percentage points to 10.3 percent, according to a recent report on the city’s logistics market by Colliers.

Together Again

ESR has frequently teamed up with GIC on China sheds, most recently with a $4 billion development fund announced last August.

Known as ESR China Development Platform, the fund also received a capital commitment from Dutch pension fund manager APG Asset Management. ECDP invests in warehouses and mixed-industrial use properties to be sourced, developed and managed by ESR.

The three partners made an initial capital commitment of $1 billion to the vehicle, with $200 million contributed by ESR and $400 million each supplied by APG and GIC.

In early 2020, ESR and GIC committed a total of $500 million to another platform focused on developing institutional-grade logistics facilities in key cities across China.

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