Chinese pair Suning Commerce Group and Shenzhen Capital Group are aiming to create a RMB 30 billion ($4.5 billion; €3.8 billion) logistics platform after pairing up to acquire retail giant Suning’s mature warehouse facilities and other high-standard logistics properties.
The pair announced that they have set up a vehicle which will initially raise RMB 5 billion to finance the initial transaction, but aims to garner RMB 30 billion depending on the success of the initial fundraising effort.
The fund would be China’s largest ever logistics-focused vehicle, beating the previous record held by Global Logistic Properties (GLP) which raised $3.7 billion back in 2015.
Per the pair’s statement the first three years will be dedicated to investment, followed by a two-year harvesting period, with two renewal periods lasting one year each. The pair aim to generate an internal return rate of 8 percent per year from the fund.
Investors have been bullish on logistics in the country for some time as e-commerce and third-party logistics companies have driven demand for high-standard warehouses due to growing consumer demand, according to recent CBRE research. The real estate consultancy said that lack of large warehouses in tier I and satellite cities will drive rental growth in the coming quarters.
Suning is no stranger to logistics and its subsidiary, Jiangsu Suning Logistics, mainly serves its partner company’s retail business which has more than 3,500 stores, but also provides warehousing and distribution for more than 1,000 companies across China, including Alibaba. The company also announced plans to invest RMB 4.25 billion for Hangzhou-based logistics company TTK Express, to expand its logistics business and cover more clients.
Suning was also reportedly part of a consortium that ended up in the final round of bidding for global logistics giant GLP earlier this year. GLP ultimately selected the investor consortium led by its chief executive, Ming Mei, in a deal valuing the business at around S$16 billion.
Government-backed investment house Shenzhen Capital has also invested in logistics and chain services, among its 801 investments, which total approximately RMB 31.6 billion.