SC Capital warehouse

After exiting four YRD properties, SC Capital is reportedly selling another asset in Wuhan (Source: SC Capital)

The real estate investment arm of banking titan Morgan Stanley has acquired a portfolio of four logistics assets in cities surrounding Shanghai from Singapore-based SC Capital Partners for an undisclosed sum, Mingtiandi has learned.

Morgan Stanley Real Estate Investing (MSREI) bought more than 210,000 square metres (226,042 square feet) of combined logistics space in the Yangtze River Delta cities of Nantong, Taicang, Suzhou and Jiaxing from SC Capital’s opportunistic fund Real Estate Capital Asia Partners V (RECAP V), according to a WeChat post last week.

“Morgan Stanley Real Estate Investments has been deploying China’s logistics real estate circuit since 2015, and its projects in China have an area of ​​more than 1 million square metres,” the translated Chinese statement of Toru Bando, MSREI’s global investment officer, read.

“In view of the current quality of key transportation hub cities with the general shortage of logistics assets, MSREI will seize valuable investment opportunities for global clients through this acquisition,” Bando added, as the American banking giant moves to expand its presence in the region with three major deals closed within the past six months.

Chinese Distribution Hubs

The portfolio includes a pair of operating assets in the Jiangsu province cities of Suzhou and Nantong — both of which are fully leased. There is also a third Jiangsu asset in Taicang and a property in the northern Zhejiang city of Jiaxaing which are both partially pre-leased and in the final stages of construction, according to market sources.

Toru Bando

MSREI global investment officer Toru Bando

MSREI said the assets are positioned to be regional distribution centres because of their access to major transport networks across the region and their proximity to the Shanghai metropolitan area.

“The industrial and logistics sector continues to benefit from the compelling demand-supply dynamics in Asia today,” SC Capital Partners chairman and founder Suchad Chiaranussati said Tuesday in a release. “With significant expertise and strategic partnerships, we believe that we are well-positioned to take advantage of the development, value-add and core investment opportunities available in China and across the region.”

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While SC Capital representatives declined to name the assets, the firm’s properties in these locations include Gear Suzhou, acquired in March 2018; Pier Nantong, purchased in June 2020; and the ongoing projects of Pier Jiaxing and Pier Taicang, based on the company’s portfolio overview.

MSREI is understood to have purchased the assets in two separate transactions, while a different unnamed buyer is in the process of acquiring another logistics asset of SC Capital in Wuhan.

The Singapore-headquartered fund manager, which has $7.1 billion in assets under management, declined to disclose the selling price.

The deal marks the 27th transaction made on behalf of SC Capital’s $850 million RECAP V fund since the vehicle was established in 2017, including the A$23.2 million (then $16.6 million) it paid last December to snap up an industrial site in Queensland, Australia, as well as the Japan deal it closed a month earlier to buy a portfolio of real estate non-performing loans for an undisclosed sum.

Pier Taicang project

Rendering of the Pier Taicang project near Shanghai’s Jiading district (Source: SC Capital)

Aside from industrial assets, the pan-Asian strategy also invests in senior living, data centres and special situations, mainly in Australia, China, Japan and South Korea.

Big in Asia

MSREI’s asset purchase comes on the heels of a recent acquisition sealed by another Morgan Stanley unit in April, when its buyout fund shelled out S$129.5 million ($94.4 million) to acquire a 59.8 percent equity stake in APAC Realty.

The deal resulted in Morgan Stanley Private Equity Asia taking over the SGX-listed firm that holds the master franchise for real estate agency ERA, which has 20,000 agents across 653 offices in the region, including over 8,300 salespeople in Singapore alone.

Michael Lane, Managing Director, SC Capital

Michael Lane, managing director, SC Capital Partners

Last December, MSREI teamed up with Indian developer Lodha to develop a logistics park measuring 72 acres (29 hectares) at Palava Industrial and Logistics Park near Mumbai, with initial investments estimated at INR 600 crore (then $80 million).

The real estate investment unit is expecting industrial markets and Class A residential assets to continue to outperform this year amid a highly uncertain global economic landscape as inflation skyrockets and central banks move to hike interest rates, according to an MSREI global market outlook report in April.

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The report said warehouse rents still have huge room for growth, especially in Asia and Europe, due to low vacancy rates and rising supply chain costs.

“Additionally, third-party logistics, retailer and wholesaler margins are yet to be materially impacted by rising costs, suggesting rent affordability remains manageable,” the report said. “Squeezed consumer incomes, however, may challenge the pass through of these higher costs which, combined with higher supply, may lead to slower rent growth over the next couple of years, particularly in secondary markets with fewer barriers to new construction.”

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