Warburg Pincus is expanding its real estate investment capabilities in Asia-Pacific by appointing Gregory Wells as an ‘entrepreneur-in-residence’ to build the New York-based private equity firm’s real estate credit exposure in the region.
As part of its long-running so-called ‘EIR’ program, Warburg Pincus provides support and financial resources to executives or entrepreneurs globally, who are looking to build a platform focused on specific market opportunities, with the ultimate objective of becoming an investor in the platform itself.
Wells’ venture – a pan-regional platform – is the first such backing by Warburg in Asian real estate credit.
Other examples from the EIR program include the appointment of Jay Nadler as executive-in-residence in 2016 to explore investment opportunities in information services, software and technology-enabled services. Then in 2014, Dinesh Moorjani, founder of Hatch Labs, was brought on as executive-in-residence to evaluate investment opportunities in the mobile industry while Peter Kukielski, former chief executive at ArcelorMittal Mining, was hired to explore setting up a mining company.
Wells is understood to have left Forum Partners, where he was managing director and head of Asia-Pacific, in June, after spending five and half years with the firm. Wells told PERE the idea of setting up a business came about through mutual discussions with Warburg Pincus’s executives. He and Joseph Gagnon, managing director and head of Asia real estate at Warburg Pincus, have known each other for 15 years and Wells has also worked on deals with the firm during his time at Forum Partners and in earlier roles.
“I have been brought on board with the expectation that we set up a business in the real estate credit space as an operating company that Warburg could then invest in,” he said.
The venture represents an expansion for Warburg Pincus in Asia where it has not to date understood to have made any real estate credit investments. With this partnership, the firm is betting on the growing opportunities for non-bank finance lending in Asia-Pacific.
“In Asia, the real estate finance market is dominated by traditional banks that are often unable to underwrite complicated, fast-moving situations or provide a highly customized financing solution to leading real estate sponsors. This contrasts to the US and Europe, where there is a deep bench of debt funds and commercial mortgage REITs that fill this capital gap. To address this market opportunity, we are very excited to be working with Wells to build the leading pan-regional real estate credit specialist in Asia,” added Gagnon.
In China, for instance, as Wells pointed out, medium and small-sized developers have always struggled to obtain financing, given how the banks focus on lending to larger borrowers and SOEs.
Wells is investing his own capital alongside Warburg to fund the platform, which is yet to be named.
The platform will initially focus on real estate financing opportunities in China and Australia, with India to be added into the mix at a later stage.
“The bulk of it will be providing financing to smaller and mid-sized sponsors with assets that are more transitional in nature, for example assets that are not fully stabilized or have a higher development component,” Wells said, describing the type of products the platform would likely invest in. He also added that the platform would also look to invest in or acquire existing platforms.
Industry veteran Wells’ venture is the latest entrepreneurial effort in Asia’s real estate industry. Just last week, PERE reported on APG’s former head of Asia-Pacific real estate Sachin Doshi raising $181 million in initial investment from Warburg Pincus for a co-living rental accommodation platform called Weave Co-Living. Warburg’s investment in this platform is in line with the firm’s typical strategy of backing growth companies.