Emerging markets investor Actis has entered into a 70-30 joint venture with a Chinese company, New Ease, to develop logistics assets in China.
The partners have committed US$200m (€179m) to develop three assets in Chongqing, Tianjin and Quanzhou.
“Our business plan is to jointly develop these assets with New Ease, hold them for three to four years to stabilise them and then exit to core investors,” said Brian Chinappi, partner and head of Actis Asia Real Estate.
He told IPE Real Assets: “Seventy percent of our activity in this region is to build to core and then sell the assets to the significant amount of capital seeking such assets.
“We have been monitoring the logistics market in China for a long time. The challenge is that there is so much capital chasing logistics that we could not find the return profile that we needed.”
Chinappi said the situation had changed in the past two years as it became apparent that a gap had emerged in the market for interim development capital.
“Two things have happened that made it more attractive to enter the market,” he said.
“First, there was so much core capital raised that some of the larger players could not self-develop to meet their growth ambitions. So they created an opportunity for us to come in.”
“There is also the rapid growth in demand from the end-users for well-located affordable space. The growth of e-commerce has turbo-charged the need for logistics beyond the tier-one cities to lower-tier Chinese cities.”
“If you look at the logistics landscape it is driven by e-commerce and not trade-related. We are very focussed on true demand, and that is the most defensive approach to get return for the medium and long term.”
Sun Dongping, founder and chairman of New Ease, said that with continuous urbanisation and the robust growth of domestic consumption in China, modern logistics warehouses had become the backbone infrastructure in selected gateway cities.
Sun, who was one of the founders of e-Shang, which has since evolved into the pan-Asian ESR logistics group, said the partners had assembled “strong” pipelines of projects in key locations.
Chinappi said the investment in the joint venture with New Ease came from the London-based investor’s US$600m Actis Asia Real Estate Fund I. With this commitment, the fund is now almost fully invested.
The fund had acquired a real estate portfolio owned by Standard Chartered Bank in August last year.
“After this fund, our expectation is to continue with our investment strategy and to grow our business,” Chinappi said. “We are focussed on growth Asia – China, South Korea, India, and Southeast Asia, particularly Vietnam and Malaysia.”