ESR Group, an Asian logistics real estate developer backed by private equity firm Warburg Pincus, and Germany’s Allianz are setting up a $1 billion (Rs 7,100 crore) investment platform to invest in India’s logistics sector.
The platform will start with an immediate equity commitment of $225 million, to be funded equally by Allianz and ESR, the two companies said in a statement on Friday. This would subsequently be converted into a platform with $1 billion in assets under management, they said.
The platform will invest in logistics projects in eight key cities: Mumbai, Pune, Chennai, Bangalore, Hyderabad, Ahmedabad, Kolkata and Delhi-National Capital Region.
“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.
Allianz Real Estate is the $67.5 billion real estate investment and asset manager within the Allianz Group.
The deal marks Allianz’s second real estate investment platform in India. The first deal was announced last year when Allianz teamed up with homegrown construction major Shapoorji Pallonji Group to create a platform for investing in commercial real estate properties. This platform was targeting to raise $500 million for equity investments.
The new logistics platform's strategy is to leverage structural trends in Tier-I and selective Tier-II cities to build a long-term, cash-flow-positive portfolio by acquiring a blend of develop-to-core, forward purchases, and stabilised or stabilising assets.
The platform comes at a time when several domestic and overseas companies as well as PE giants have shown interest in India's logistics sector.
Two months ago, Singapore-headquartered logistics facilities provider GLP entered India in a partnership with Mumbai-based industrial real estate developer IndoSpace.
GLP will invest in IndoSpace's investment vehicles including in IndoSpace Core, a joint venture between IndoSpace and Canada Pension Plan Investment Board (CPPIB). IndoSpace Core was formed in 2017 to acquire and develop logistics facilities in India. CPPIB initially committed about $500 million to IndoSpace Core for a significant majority stake.
Earlier this year, VCCircle reported that Godrej Fund Management, the real estate private equity arm of the diversified Godrej group, was preparing to float funds to invest in warehousing and retail segments.