APG Asset Management has joined the ranks of large institutional investors that have set up long-term logistics real estate investment partnerships in China with an up to $650 million investment in e-Shang, a Shanghai-based developer and operator.
The investment by the Dutch pension manager, announced today, comprises the purchase of a 20 percent stake in e-Shang, sufficient to gain a seat on the company’s board. However, the largest component of the investment will be in the firm’s development pipeline.
Sachin Doshi, APG’s head of non-listed real estate for Asia Pacific, told PERE the partners expected the capital infusion to aid it in tripling e-Shang’s portfolio to 50 million square feet of logistics space in the country from its existing 16 million square feet of operational and under development warehouses.
“The target is not set but we do think the opportunity is still huge,” he said, “We will build that pipeline based on the quality of the opportunities before us.”
APG’s investment in e-Shang is the latest in a string of large-scale institutional partnerships focused on China’s burgeoning logistics property sector over the past few years. Other logistics groups to have received considerable institutional backing include Global Logistic Properties, which has been capitalized by both international and domestic institutions and Goodman Group and ProLogis, both of which have been backed by international institutions.
APG’s investment, on the other hand, represents the largest backing by institutional capital for a Chinese logistics development company – albeit one with US private equity backing. Started in 2011 with venture capital backing from Warburg Pincus, e-Shang has grown from an initial portfolio of little more than 500,000 square feet to 16 million square feet today.
APG’s investment means a dilution of ownership in e-Shang for Warburg Pincus and its management, but not an exit for them as it reflects the issue of new equity as opposed to a sale. Moreover, it is designed to provide the working capital for the firm to realise its ambitious growth targets and follows backing by Goldman Sachs, which provided it with $120 million in “pre-IPO” financing in December.
Doshi said while the ultimate plan for e-Shang could include an IPO, there is no current expected timeframe for the potential listing. And, even when that does happen, he expected the joint venture with APG to continue. “That is where a significant proportion of our capital will be going.”
In the announcement, Jeffrey Shen, co-founder and chief executive officer of e-Shang, said: “We are excited to have APG as our new shareholder and joint venture partner to explore more opportunities and further expand our warehousing and logistics servicing platform in China. As the demand for modern, high quality warehouse and logistics services continues to grow, we will seek to further solidify our leading market position and deliver quality service and growth for our stakeholders.”
Jeffrey Perlman, executive director of Warburg Pincus, echoed Doshi’s growth expectations when he said: “With APG’s investment and the recent financing from Goldman Sachs, e-Shang is well positioned to more than triple the size of its portfolio over the next several years with the plan of an eventual IPO. We look forward to working closely with APG and continuing to support e-Shang as it enters its next phase of growth.”