e-Shang Redwood to re-enter India, invest $100 million annually

Source: LiveMint.com, June 26, 2017

Mumbai: International logistics developer e-Shang Redwood (ESR) is returning to India with plans to invest over $100 million in the country annually, a top executive at the company said.

Warburg Pincus-backed ESR is one of Asia’s largest developers and operators in logistics and warehousing. It was formed by the merger of e-Shang Cayman Ltd and Redwood Group Asia Pte. Ltd in 2016. Based out of Hong Kong and Singapore, it owns and manages around 7.3 million sq. metres of assets in China, Japan, Singapore and South Korea.

Between 2006 and 2009, Redwood Group (before its merger with e-Shang) had secured land and started discussions to form joint ventures in India, but none of the projects took off. The company finally decided to leave India in 2011 to concentrate in the “more institutional, liquid and capital-intensive logistics markets of Japan, China and South Korea around the time,” Charles de Portes, co-founder and president of ESR, told Mint over the phone

“We started sending people (to India) significantly in 2016 for updated research, securing of a pipeline of prime projects and reconstituting our team. So, we are very active now in India in terms of both sourcing projects and putting together what we feel is our dream team specialised in logistics development, acquisitions, leasing and investment management,” Portes said.

The company is in the process of building its leadership team and setting up its India office in Mumbai. Jai Mirpuri, currently senior managing director of investments at ESR in Singapore, has been named chief investment officer for the India business.

“Our average pace of investment may well translate into in excess of $100 million annually, comprised of land and construction. We intend to make material investments from the second half of this year and are in negotiations with multiple potential investment partners including those with which we have strong relationships,” Portes said.

The company plans to build logistics and warehouse parks of around 100,000 sq. metres annually in “large markets tied with domestic and global trade,” like Mumbai, Bengaluru, Chennai and Pune either through joint ventures with local partners or on its own. He, however, declined to provide details of the local builders or partners he is currently in talks with. “We anticipate to announce launches of projects as early as the second half of this year,” he added.

According to a person aware of the development, who spoke on condition of anonymity, ESR is in discussions with several Indian developers including Hiranandani Group which is currently planning to set up a logistics park over 250 acres in Pune. A Hiranandani spokesperson declined to comment on the matter.

Apart from US-based private equity firm Warburg Pincus, which already has presence in the logistics space in India through its partnership with Bengaluru-based Embassy Group, ESR is backed by several global investors including APG Group, CPPIB, Morgan Stanley & Co and Goldman Sachs Group, Inc.

Earlier this year, a consortium of Chinese investors also infused around $300 million into the company. “Logistics, although still a nascent product class, is in India now much better understood and in higher demand by institutional investors than ten years ago… Further, there have been significant advancements in infrastructure as well as a more liquid debt market with lower cost of capital,” Portes said.

Tax reforms such as the upcoming goods and services tax (GST) have prompted the company’s decision to take a fresh look at the Indian market, he said. “Our traditional profile of investors are now much more comfortable with the overall dynamics and liquidity of the product,” he said.

According to real estate advisers, GST and Real Estate Investment Trusts (REITs) are both likely to boost quality (Grade A) warehousing stock across the country. As per estimates by JLL, a global property advisory firm, India has around 111.9 million sq. ft of warehousing space. It is expected to increase by 18% to 132.5 million sq. ft this year.

 

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