After funding its development projects with its own balance sheet capital for five years, Fosun Stater Logistics, the logistics platform of 628 billion yuan ($97.4 billion, €81.3 billion) Chinese conglomerate Fosun Group, is planning to raise almost half a billion dollars, targeting foreign investors for the first time, PERE has learned.
Fosun Stater Logistics’ current plan is to raise a total of $450 million via two offshore logistics vehicles: a core logistics vehicle and a develop-to-core logistics vehicle, according to two sources involved in the fundraising. For the core vehicle, the firm is aiming to raise $200 million before the second quarter of 2020 and it will be seeded by three logistics assets in Hangzhou, Wuxi and Xian in China. These three projects have been completed and are fully occupied. In addition, two development projects that are under construction will be included in the core vehicle upon completion. For the develop-to-core logistics vehicle, the firm is planning to raise $250 million for seven logistics development projects in the pipeline.
The core vehicle and the development vehicle will target high single-digit and mid-teen returns, respectively, the two sources told PERE.
According to the sources, Fosun Stater Logistics had considered raising third-party capital from foreign investors as early as 2015 but decided to use its own balance sheet capital for investments instead. The company was launched as the developer and asset manager of the pharma logistics partnership between Fosun Group and Hong Kong-listed pharmaceutical company SinoPharm Group in 2014. The sources told PERE that Fosun’s partnership with SinoPharm allows the former to acquire prime land from the government. Fosun Stater Logistics has been funding the development projects with balance sheet capital from Fosun Group so far.
With the backing of SinoPharm, the warehouses developed by Fosun Stater Logistics are equipped with the hardware and standards that enable them to accommodate pharmaceutical companies and cold chain distribution clients, according to the two sources. Because less than 3 percent of warehouses in China can meet these standards, these building specifications give the platform an edge in attracting a niche group of tenants.
The two sources told PERE that Fosun Group has been trying to extend its asset management capability into the logistics business and to eventually operate in an asset-light business model. According to the group’s interim results report, the group’s asset management business reached 180 billion yuan in June and generated a management fee of 425.6 million yuan for the six months ended on June 30.
Fosun Group is one of the four biggest privately-held conglomerates in China alongside with HNA, Dalian Wanda Group and Anbang Insurance Group. Back in 2014, the group’s goal was to build a global platform with a core focus in real estate, according to an interview PERE had with Xu Xiaoliang, the co-president of Fosun Group. Xu told PERE that the firm planned to grow its real estate assets under management from $16 billion to $80 billion in 2020.
Fosun is one of the few Chinese companies that has the capability to purchase real estate assets overseas with offshore capital after the Chinese government imposed capital controls in 2016, according to one source with knowledge of the matter. In December 2016, the Chinese government clamped down on overseas real estate acquisitions to stabilize the renminbi, restrict capital flight and reduce financial risk.
Today, the group has $21.1 billion of assets under management under its real estate funds and asset management platforms, according to Fosun’s June interim report. These include the Japanese real estate capital management company IDERA, the French listed real estate fund management company Paris Realty Fund SA, the European real estate asset management company Resolution Property Investment Management, the Russian asset management company Fosun Eurasia Capital and the Brazilian fund asset management company Rio Bravo.