ESR-Allianz Real Estate JV plan to invest $1 billion in Indian logistics and industrial property market

e-Shang Redwood (ESR), the logistics developer working in the Asia-Pacific has joined hands and entered a strategic partnership with worldwide asset manager Allianz Real Estate to invest nearly $1 billion in India’s logistics market. The decision has come looking at the rapid increase and growth the logistics and industrial property market is witnessing.

The partnership between the two will focus on the development of large-scale logistics and industrial facilities in eight key cities in India – Mumbai, Pune, Chennai, Delhi, Ahmedabad, Kolkata, Bengaluru and Hyderabad. The companies will have an opportunistic approach to other markets in India.

Moreover, the program will also focus on identifying other opportunities to acquire assets in these cities.

Charles de Portes, co-founder, and president of ESR said, “We are delighted to partner with Allianz, an existing strategic partner of ESR in other geographies. This JV with a leading institutional investor who has deep experience in Asia marks a key milestone in our regional growth plan.”

The initial and immediate equity for the program is $225 million and is to be funded in a 50:50 ratio by the two companies, Allianz Real Estate and ESR. This investment will eventually be converted into $1 billion according to the deal. The program is focused on making the most of the structural trends in tier one and selective tier two cities, to build a long-term, cash flow-positive logistics portfolio by acquiring a blend of develop-to-core, forward purchases, and stabilized or stabilizing assets.

ESR, on Thursday, started its first project in India, an industrial and logistics park in Chakan MIDC Maharashtra Industrial Development Corporation), Pune.

ESR, backed by Warburg Pincus, is among Asia’s largest developers and operators in logistics and warehousing, created by the merger of e-Shang Cayman Ltd and Redwood Group Asia Pte. Ltd in 2016. With nearly 7.3 million square million assets in China, Japan, Singapore, and South Korea, the company is based out of Hong Kong and Singapore.

With the increase in the involvement of e-commerce in daily life in the country and the amplified internet and smartphone usage on a regular basis, rising reception of online payments and promising demographics will continue to boost the growth of e-commerce, keeping the demand high for the modern logistics facilities, ESR said.

“India’s logistics sector is coming of age. The sector is benefitting from a lot of favorable trends, such as stellar consumption patterns, continued infrastructure spending, increasing transparency and the nation-wide implementation of a uniform indirect tax system,” said Rushabh Desai, Asia-Pacific CEO of Allianz Real Estate.

2017 saw an investment of more than a billion dollars in the warehousing and logistics sector and is receiving an increased interest in creating and sustaining businesses around steady rental income. Various international asset management companies including Canada’s Brookfield Asset Management Inc., partner with Assetz Property Group from Singapore are looking for land. Embassy Industrial Parks Pvt. Ltd, Ascendas-Singbridge Group and Mahindra Lifespace Developers Ltd are also in talks to build industrial parks and clusters.

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