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Warburg Pincus on thriving in a volatile environment

Flexibility and creativity are key drivers of success, say Warburg Pincus’s head of Asia-Pacific real estate Jeffrey Perlman and head of China real estate Ellen Ng.

This article is sponsored by Warburg Pincus. 

What were your firm’s key events during 2021?

Jeffrey Perlman

Jeffrey Perlman: We witnessed several major events over the past 12 months. We launched our inaugural regional asset-level fund, Warburg Pincus Asia Real Estate, which closed with committed capital of $2.8 billion. Over 60 percent of the capital raised was from leading institutional investors in Asia.

The second big event was ESR’s acquisition of ARA Asset Management. This was a transformational transaction and created the largest new economy real estate platform with nearly $60 billion of logistics AUM.

 

Ellen Ng

Ellen Ng: On the M&A front, we merged two existing portfolio companies, D&J and New Ease, to form DNE, an integrated new economy infrastructure developer and operator in China. As part of the transaction, DNE raised over $1.5 billion from leading investors. We are proud to have completed this landmark merger.

What has the operating environment been like?

JP: The operating environment has been a tale of two outcomes during the pandemic: location-based real estate has been hit particularly hard, yet technology-enabled real estate has outperformed. As technology disruption has been a core foundation of our real estate investment strategy over the past decade, we began building our exposure in logistics and IT office parks. Currently, over 75 percent of Warburg Pincus’s real estate portfolio is in new economy real estate investments, with less than 10 percent of our portfolio in location-based real estate.

EN: Adhering to our new economy property strategy, we were a lead investor into JD Property, formed new partnerships to pursue cold storage in China, increased exposure to logistics across the region through new joint ventures and expanded our activities in rental apartments, particularly in the build-to-rent space.

What key challenges did you have to overcome?

JP: With the imposition of travel restrictions, we had to turn to an entirely virtual fundraise for our inaugural Asia Real Estate Fund. Despite the challenge of not being able to meet investors face-to-face, we successfully raised the fund virtually and completed a final close at $2.8 billion, nearly doubling the initial target of $1.5 billion.

EN: Given our regional effort with teams in various offices across Asia, growing the team and gelling it was challenging as we could not travel freely. We were able to successfully navigate through this, given that the partners and core team members have been working together cohesively for over a decade.

What is responsible for your success?

JP: I would break it down to a few big drivers. First, our thesis-based approach to investing has allowed us to identify secular trends early and stick with that conviction over time. Second, we take a partnership approach, which positions us to access the best local operators via our deep ecosystem in each asset class to source opportunities.

EN: Being flexible and creative is crucial in a volatile environment. It has allowed us to identify unique angles to pursue a large secular trend, whether at the corporate or asset level. This is a key differentiator of the Warburg ­Pincus approach.