August 22, 2023 - ESR has established its largest-ever onshore income fund in China, launching with a total investment capacity of RMB 10 billion ($1.4 billion).
The Hong Kong-listed industrial giant is partnering with one of China’s leading insurance firms on the fund, which will be seeded with a logistics portfolio spanning over 350,000 square metres (3.8 million square feet) from ESR’s balance sheet and valued at RMB 2.3 billion, the company said Tuesday in a release.
The seed portfolio contains six stabilised assets located in major logistics and industrial hubs across different regions in China, including the Yangtze River Delta, the Greater Bay Area and the Beijing-Tianjin-Hebei region.
“This milestone achievement testifies to the strong relationships and track record which ESR has built with domestic RMB investors, and the compelling long-term income potential of our portfolio of well-located and premium logistics assets in China,” said ESR co-founder and co-CEO Jeffrey Shen.
Going Asset-Light
The transaction is expected to close in the second half of this year. Shen placed the deal in the context of ESR’s asset-light strategy, whereby the group is seeking to boost fund management fee income and recycle capital into new Asia Pacific investments.
The same strategic considerations underpinned the other deal announced this week by ESR: the sale of a 30 percent stake in the group’s Kwai Chung Cold Storage Logistics Centre project in Hong Kong to an unnamed “strategic investor” from mainland China.
With the transaction, ESR will reduce its own stake in the $1.4 billion project to 40 percent while continuing to act as investment, development and asset manager. ESR previously brought aboard local developer Chinachem Group, which acquired a 49 percent interest in the New Territories project for an undisclosed price in mid-2022.
Backed by shareholders including the Ontario Municipal Employees Retirement System, Singapore sovereign fund GIC and China’s JD.com, ESR manages $150 billion in total assets across Asia Pacific, Europe and North America.
Onshore Action
Just last month, ESR arch-rival GLP’s fund management arm announced the final closing of the eighth vehicle in its China onshore income series, amassing equity commitments of RMB 2.6 billion ($360 million).
The news came after GLP Capital Partners announced the final closings of the sixth and seventh funds in the series last November with respective commitments totalling $1.05 billion and $743 million.
China Income Fund VIII’s portfolio comprises more than RMB 5 billion worth of core logistics assets across a total gross floor area of 870,000 square metres. The nine properties were seeded from GLP’s balance sheet and are located in key logistics hubs including Shanghai, Guangzhou, Zhongshan, Xiamen, Changsha and Chengdu.
