ESR Kwai Chung

ESR and Chinachem will build a seven-storey facility in Kwai Chung

ESR has found a partner for a HK$11 billion ($1.4 billion) logistics project which it purchased last month in Hong Kong, with the industrial specialist announcing a joint venture on Monday with local developer ChinaChem Group.

Entering the logistics sector for the first time, the privately held developer is taking a 49 percent stake in the development project at the Kwai Chung container port for an undisclosed consideration, following ESR’s successful HK$5.26 billion bid for the site at a government land tender.

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“The cooperation between Chinachem and ESR is a win-win situation, as Chinachem is strong in Hong Kong development and is looking to diversify its business into New Economy assets,” Chang Rui Hua, group head of capital markets and investor relations at ESR told Mingtiandi. “ESR can tap Chinachem’s rich Hong Kong development experience and at the same time, continue to enlarge its New Economy asset portfolio in Hong Kong.”

The partners are now set to develop up to 1.48 million square feet (138,000 square metres) of warehouse space on the site at Mei Ching Road and Container Port Road South, with ESR indicating that the project will incorporate both cold chain and ambient logistics space.

Cold Warehouses for a Hot Market

Occupying a 594,652 square foot plot less than a kilometre from a customs house, ESR and Chinachem point to the project’s favourable access to Hong Kong’s primary commercial hubs, international airport and land border with mainland China as advantages for the planned facility.

Chang Rui Hua ESR

ESR group head of capital markets and investor relations Chang Rui Hua (Source: ESR)

“With Hong Kong continuing to serve as a window between mainland China and the rest of the world, together with the blooming of e-commerce and increasing demand for processed food, both ESR and Chinachem are confident about the promising prospects of logistics assets,” said Donald Choi, executive director and chief executive of Chinachem.

The partners said that they will develop a seven-storey facility with two basement levels of car parking on the site, with completion expected in 2027. Chinachem said that it would make use of its project management expertise to develop a modern and sustainable cold chain facility.

Calling the project a milestone in his firm’s diversification strategy, Chinchem’s Choi added that his company will look for further collaboration opportunities with ESR beyond the Kwai Chung project. In April of this year the developer won its third Hong Kong project tender in 15 months when it picked up a commercial site near Hong Kong’s international airport for HK$2.78 billion.

Electric Rooftops

With corporate occupiers increasingly focused on leasing sustainable space and investors preferring to back green projects, ESR said it will work closely with utility operator CLP, its strategic partner in Hong Kong, to promote the use of renewable energy in the warehouse project.

The Warburg Pincus-backed developer and fund manager said that the logistics project will incorporate more than 32,290 square feet of rooftop space for photovoltaic panels, and will also include sustainable features and strategies designed to achieve at least a gold certification under the LEED standard for green buildings.

Some 30 percent of the site area is being set aside for greenery, including a rooftop garden, and an irrigation system will use recycled water to maintain the landscaping. As an extra perk the project will build in electric vehicle charging points for environmentally-conscious non-MTR riders.

“In this new economy driven by the rising e-commerce industry and growing demand for imported food items and pharmaceuticals, our Kwai Chung project is poised to fulfil the growing demand for large-scale, cutting-edge logistics and cold storage space in Hong Kong while enabling Hong Kong to reinforce its leading position as a leading logistics hub to the world and to China,” said Jeffrey Shen and Stuart Gibson, co-founders and co-CEOs of ESR.

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