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GIC, Warburg-backed ESR form $750 mn India warehousing JV
Photo Credit: 123RF.com

Singapore sovereign wealth fund GIC Pte Ltd and ESR Cayman Ltd said Tuesday they have formed a joint venture to develop and acquire industrial and logistics assets in India.

GIC will hold an 80% stake in the JV and ESR, an Asia Pacific-focused logistics real estate platform backed by private equity firm Warburg Pincus, will own 20%.

The JV will have a capital pool of $750 million, the two firms said in a statement.

The JV will develop and acquire industrial and logistics facilities in Tier 1 and Tier 2 cities across India. It will be seeded with a 2.2 million sq ft build-to-core asset around Mumbai and Thane.

“GIC has been investing in India for more than a decade and this investment is a testament to our confidence in the long-term potential of this market,” said Lee Kok Sun, chief investment officer, real estate, GIC.

Kishore Gotety, co-head (Asia ex-China), real estate, GIC, said that e-commerce growth in India over the long term and rising internet penetration is likely to drive strong demand for industrial and logistics assets.

“This is further supported by the emphasis on infrastructure development, changing supply chains, and low vacancy levels. This Joint Venture is well-positioned to benefit from these tailwinds, bring institutional-grade assets into this market, and generate resilient returns,” he said.

ESR began its India journey three years ago and has so far amassed 700 acres of land and a project portfolio of 16.6 million square feet. It plans to expand its portfolio through development, acquisitions and joint ventures. ESR India had also tied up with Future Group to develop warehousing parks last year.

“This strategic partnership provides us with immediate scale to capitalise on the early growth stages of India’s rapidly modernising industrial and logistics landscape and tap high-growth potential opportunities and further expand our industrial and logistics portfolio,” said Abhijit Malkani and Jai Mirpuri, country heads at ESR India.

Warehousing as an asset class has been on the radar of global investors over the last few years. A bunch of factors including rising internet usage and implementation of the goods and services tax has fuelled growth of the sector.

The coronavirus lockdown earlier this year further added to the growth of the sector with people, from metros as well as smaller cities, shopping online. While the pandemic has disrupted businesses, it has turned out to be a boon for warehouse developers with e-commerce companies fuelling demand.

In the last few years, a bunch of joint ventures and platforms focused on the warehousing asset class have come up. Blackstone, one of biggest owners of commercial real estate in the country, recently set up a platform with Mumbai-based Hiranandani group for industrial and warehousing assets in the country.

Last year, The Xander Group set up a platform worth $250 million for warehousing assets in the country. Purvankara, which has traditionally developed residential projects, also took a leap into the warehousing sector recently and tied with Morgan Stanley to fuel its growth strategy.

GIC

The wealth fund has been an active investor in India’s real estate market and has taken exposure across asset classes in the sector. GIC set its foot in India’s real estate market in 2005 and has since then become one of the biggest property investors in the country, possibly second only to US-based Blackstone.

This is GIC’s fourth investment this year for a play in India’s real estate market. Recently, it struck a deal with The Phoenix Mills Ltd to form a retail-led mixed use platform.

In July, the wealth fund invested a total of Rs 689 crore to buy units of Mindspace Business Parks REIT during and before the initial public offering of the real estate investment trust sponsored by K Raheja Corp and Blackstone.

In January, GIC invested Rs 41.6 crore in Prestige Estates Projects Ltd. GIC also pared its stake in Mumbai-listed Godrej Properties Ltd earlier this year.

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