Warburg Pincus on the importance of relationships and conviction

Conviction-driven investments performed well, say Jeffrey Perlman, head of Asia-Pacific real estate and Ellen Ng, head of China real estate at our Firm of the Year: China.

This article is sponsored by Warburg Pincus

What were the key events for your firm last year?

Jeffrey Perlman

Jeffrey Perlman: A big milestone event in 2020 was our full exit from ESR, a company we co-founded in 2011 as a logistics real estate platform in China. Today, it’s a platform with operations in seven countries, AUM of approximately $30 billion and a market capitalization of over $10 billion as of year-end 2020.

It has been a remarkable story, which really shows the power of the private equity model – the ability to work with talented entrepreneurs to grow and build big businesses in this part of the world. Despite covid, we have also seen significant growth in many of our platforms, as over 75 percent of the Warburg Pincus real estate portfolio is in “new economy” real estate areas such as logistics, data centers, life science and IT parks, and covid is accelerating many of the secular trends underpinning these sectors.

Ellen Ng

Ellen Ng: We also successfully raised new equity rounds and brought in new capital partners across our portfolio, including Mofang Apartments, Princeton Digital Group, D&J, Newease and Sunsea Parking, reflecting strong capital interest in these new economy real estate operators.

How has the operating environment been? 

JP: We have really benefitted from having zero exposure to retail, hospitality, office and for-sale residential in China. The areas we are exposed to have been very resilient.

EN: In China, we were fortunate that the external shock was very short and even the worst-affected sectors in our real estate portfolios were back to pre-covid levels by June. The second half was incredibly active.

How did you overcome the challenges you faced?

JP: As real estate is such a hands-on industry, the inability to travel during covid was a challenge. However, we benefitted from having boots on the ground. Our 30-plus real estate professionals spanning four offices in China and South-East Asia helped a lot as well as our deep local operating partner relationships.

EN: Some of the deals took longer to close, but our relationships, beliefs and conviction in the sectors supported us to get through the challenges faced, and things had caught up by the fourth quarter of 2020.

What is mainly responsible for your success?

EN: There are three key differentiators and advantages behind Warburg Pincus’ success in real estate investment.

The first is the thesis-based approach that allows us to stay ahead of capital flows. We look for secular trends that we can play in over a long period of time. This approach positions us to get access to the best local operators to source and build scale as we did with logistics and are now doing with IT parks, biotech parks, data centers and self storage.

The second element is the depth of our ecosystem, which gives us an information advantage. Today, our active real estate portfolio companies control over $100 billion of AUM, which gives us unrivaled access to information and the understanding of nuances of different markets.

Lastly, it’s local boots on the ground, combining with our partnership centric model. The last part is important because everything we do in real estate, whether at the asset level or the entity level, is always with a partner.