{"id":1634,"date":"2022-12-15T14:28:44","date_gmt":"2022-12-15T06:28:44","guid":{"rendered":"https:\/\/www.dragoncor.cn\/?post_type=cpt-news&p=1634"},"modified":"2023-01-12T15:16:40","modified_gmt":"2023-01-12T07:16:40","slug":"no-iivestor-is-willing-to-miss-out-investment-opportunities-in-chinas-logistics-sector","status":"publish","type":"cpt-news","link":"https:\/\/dragoncor.cn\/en\/news\/no-iivestor-is-willing-to-miss-out-investment-opportunities-in-chinas-logistics-sector\/","title":{"rendered":"No Investor is Willing to Miss Out Investment Opportunities in China’s Logistics Sector"},"content":{"rendered":"
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The share of logistics transactions in China major investments has risen from 5% in 2019 to 21% in 2021, and Zhenliang Research Institute predicts that it would also stabilize at around 20% in 2022.<\/p>\n<\/div><\/div>\n\n

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Recently, market news such as the increase of investment in logistics by various capitals and the expansion of REITs have made the discussion of the investment boom in logistics remain high.<\/p>\n<\/div><\/div>\n\n

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On December 8, Li Chao, vice chairman of the China Securities Regulatory Commission, introduced in a China REITs event that they will continue to promote the issuance and listing of more high-quality projects, expand the scope of REITs pilot projects, and research and promote the expansion of the pilot scope to market-oriented long-term rental housing and commercial real estate fields, etc.<\/p>\n<\/div><\/div>\n\n

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Many brokerages believe that this move gives investment opportunities for warehousing and logistics REITs. Ping An Securities believes that among REITs in various sectors, the warehousing and logistics sector have a relatively high cost performance ratio. In terms of the primary market, warehousing and logistics REITs have currently issued 2 REITs, and the proportion of the total scale is second only to transportation infrastructure and park infrastructure. In the secondary market, warehousing and logistics REITs have achieved a moderate increase in the overall public offering REITs, with an average maximum increase of 36.23% since listing; the Sharpe ratio (yield\/volatility) is relatively high, higher than that of REITs as a whole, and also higher than that of CSI 300 and treasury bonds. Compared with credit bonds as a whole, the price\/performance ratio of income is relatively high.<\/p>\n<\/div><\/div>\n\n

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Currently, the pattern of the entire logistics industry development presents the status quo of foreign capital\u2019s high participation. Recently, DragonCor, a multi-asset management platform under Blackstone Real Estate Fund, announced that 280,000 square meters of high-quality modern warehouses in the Greater Bay Area will soon be added to its platform. Sources said that the assets in this massive acquisition include R&F\u2019s Guangzhou International Airport. 36Kr had a dialogue with Peter Hwang, CEO of DragonCor, and understood the company\u2019s strategic direction has shifted from large-scale expansion to diversified transformation.<\/a><\/p>\n<\/div><\/div>\n\n

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Blackstone has repeatedly expressed its optimism towards China’s logistics market. Frank Zhao, managing director of Blackstone Real Estate China, said recently, \u201cChina is the world’s largest e-commerce market, increasing its global market share to more than 40%. There\u2019s a continued growth in China logistics, supported by strong e-commerce tailwinds,\u201d<\/p>\n<\/div><\/div>\n\n

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Behind this is the undeniable growth potential of logistics. Knight Frank, a British real estate consulting company, has monitored that in the first half of 2022, the rents of logistics in 17 cities in Asia Pacific will maintain a steady increase. Occupiers also tend to seek more logistics warehouse space to avoid shortages of goods due to supply chain fluctuations, as many cities are in short supply.<\/p>\n<\/div><\/div>\n\n

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Li Minwen, Head of Asia Pacific Research at Knight Frank, said: \u201cLogistics is a relatively new asset class in the Asia Pacific region, which has not yet reached the level of maturity in Europe and the United States. For a long time, due to high land costs and the government’s strict control over the supply of industrial land, The development of logistics in the Asia-Pacific region has been hindered. As a result, there is a structural undersupply of modern logistics facilities across the region. Although the explosive growth in demand for logistics space may stabilize as the epidemic subsides, in the medium term, in order to support its rapid industrialization The speed of economic and urbanization, and the demand for various logistics assets in the supply chain will continue to maintain the upward trend in rents in the Asia-Pacific region.\u201d<\/p>\n<\/div><\/div>\n\n

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Even though the top ten domestic logistics developers occupy nearly 70% of the market share, fierce competition is taking place in the field of logistics. In addition to financial institutions such as Blackstone and Hopu, there are also domestic and foreign traditional logistics developers represented by ProLogis, Baowan, and Ambow; state-owned enterprises with more warehousing and logistics assets such as Yantian Port and Guangzhou Port; and Represented by Vanke and Greenland, real estate companies that rely on the advantages of land acquisition and land storage to build logistics parks. At the same time, what cannot be ignored is the e-commerce lineup. E-commerce companies headed by Ali and JD.com are making efforts to build their own warehousing fields. Several lineups have their own competitive advantages.<\/p>\n<\/div><\/div>\n\n

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Investing in Guangzhou International Airport R&F Integrated Logistics Park<\/strong><\/p>\n<\/div><\/div>\n\n

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According to DragonCor\u2019s official website, residential and retail are its new main businesses. The company has also added an ESG department. Regarding the first two businesses, Peter Hwang, CEO of DragonCor, did not disclose too much details. He emphasized to 36Kr that \u201cwarehousing logistics is still our core business.\u201d In addition, he believes that DragonCor\u2019s main advantage is the support from Blackstone.<\/p>\n<\/div><\/div>\n\n

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Peter Hwang has served as the CEO of DragonCor in July 2021. This is the first time that Blackstone has established this role. Before joining DragonCor, he had a diverse background. His first job was as an engineer at Boeing, and then he worked as a consultant at McKinsey. During his seven years at Iron Mountain, an information management service company, he led several M&A projects and the continued growth of its APAC\u2019s business.<\/p>\n<\/div><\/div>\n\n

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By the end of 2021, Blackstone has acquired more than 1.5 billion square meters of logistics around the world through more than 200 transactions. R&F transferred the remaining 30% interest in Guangzhou International Airport R&F Integrated Logistics Park to Blackstone, and received RMB 5.3 billion to contain the debt crisis. For this expansion, DragonCor did not disclose the specific acquisition details of the 280,000 square meters of warehouse in the Greater Bay Area. Some industry experts speculated that the seller was R&F Properties. According to public market information, in 2019, the Guangzhou International Airport R&F Integrated Logistics Park has a project with an area of about 280,000 square meters to be built. The proposed property includes high-end general warehouse, multi-temperature cold storage and constant temperature warehouse.<\/p>\n<\/div><\/div>\n\n

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According to data from the Guangzhou Airport Logistics Association, as of the end of 2021, R&F\u2019s comprehensive logistics park has a total planned construction area of 1.42 million square meters, of which 920,000 square meters has been put into operation.<\/p>\n<\/div><\/div>\n\n

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Peter Hwang revealed to 36Kr, \u201c280,000 square meters of high-quality modern warehouses were recently added to the DragonCor management platform. These assets are in a prime location with connection to many highways to access the Guangzhou Airport and major cities in Bay Area. Our tenants are leading Chinese corporations in fast-growing sectors such as e-commerce and cold storage.\u201d These warehouses partner with DragonCor because of its strategic layouts of the locations and excellent property management services.<\/p>\n<\/div><\/div>\n\n

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DragonCor manages logistics portfolio that spans more than 40 logistics parks across 18 cities, with a gross floor area totaling over 5 million square meters.<\/p>\n<\/div><\/div>\n\n

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Competition between private equity funds, logistics giants, and major internet companies<\/strong><\/p>\n<\/div><\/div>\n\n

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It is understood that the market share of China’s logistics is relatively concentrated. As of now, ProLogis ranks first in the logistics market share; its logistics infrastructure in China has a total area of more than 49 million square meters. According to a research by Guosheng Securities, in the second quarter of 2022, the market share of GLP was close to 25%. And the market share of domestic logistics real estate developers such as VX, Baoqing, and ESR was currently below 10%.<\/p>\n<\/div><\/div>\n\n

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This means that even with the successful acquisition of the largest logistics park in the Greater Bay Area, which would increase Blackstone’s logistics area under management in China by one-third, its market share in mainland China is still not sufficient to rank among the industry leaders.<\/p>\n<\/div><\/div>\n\n

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Regarding DragonCor\u2019s market share, Peter Hwang says, \u201cGiven the fast growing and dynamic nature of the Chinese logistics industry, it is quite difficult to be precise on market shares of players. Nonetheless, at DragonCor, we do believe that we\u2019ve built one of the largest and most sophisticated logistics portfolios in the country, spanning more than 40 logistics parks across 18 cities, including the largest single logistics park in the Greater Bay Area. The DragonCor platform is backed by Blackstone \u2013 the largest owner of commercial real estate in the world \u2013 and benefits from the firm\u2019s scale, industry knowledge and global network of resources and knowledge.\u201d<\/p>\n<\/div><\/div>\n\n

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Blackstone\u2019s low market share in China is related to its strict acquisition standards for logistics assets. At the beginning of 2021, there were market rumors that Blackstone, Meituan and JD Logistics were bidding for control of China’s logistics assets. The transaction price may be as high as US$2 billion, and JD.com finally became the winner.<\/p>\n<\/div><\/div>\n\n

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Indeed, as a representative of private equity funds with direct investments in logistics assets, Blackstone has relatively complete financing capabilities, project acquisition capabilities, and operational transformation capabilities. Traditional logistics companies and internet companies with self-built logistics and warehousing also have their own competitive advantages.<\/p>\n<\/div><\/div>\n\n

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Zhou Ying, head of JLL Xingquan Research Institute, told 36Kr, \u201cLogistics giants like ProLogis entered the Chinese market around 2003. Compared with Cainiao and JD.com, which started to build their own logistics parks around 2013, the former has advanced Traditional logistics companies focus on one part of the entire industrial chain, have accumulated advantages in development and operation, and have a better understanding of the owner’s import and export needs and how to store goods.”<\/p>\n<\/div><\/div>\n\n

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Zhou Ying said, “It is difficult for the logistics companies built by the Internet to shake the market share of traditional logistics companies first, but the effective reach between upstream suppliers and downstream consumers is very strong, and they have the ability to open up the entire industrial chain; in addition , traffic and sufficient cash are the advantages of Internet companies.\u201d<\/p>\n<\/div><\/div>\n\n

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It can be seen that in terms of approaching the supply chain and seizing opportunities on the track, financial institutions, traditional logistics and other forces do not have advantages in China’s domestic logistics market, and they are also facing challenges.<\/p>\n<\/div><\/div>\n\n

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Office buildings and shopping centers are no longer in sight<\/strong><\/p>\n<\/div><\/div>\n\n

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It is undeniable that domestic and foreign capital regard the global logistics industry as a new growth point.<\/p>\n<\/div><\/div>\n\n

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In 2021, SF REIT (HK.2191) and JD Logistics (HK.2618) will go public in Hong Kong one after another. The investment portfolio of SF REIT includes three logistics properties located in Hong Kong, Wuhu and Foshan; JD Logistics currently has a total market value of over HK$95 billion on the Hong Kong Stock Exchange.<\/p>\n<\/div><\/div>\n\n

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Zheng Zhong, head of Dongsheng Jimen Asset Management and Investment Promotion Department, believes that under the background that office buildings and shopping centers in major cities continue to be under pressure due to high vacancy rates and large volumes of new supply, logistics will become a key player in the non-residential real estate industry. new growth point. Benefiting from the rapid development of e-commerce and express delivery industry, logistics is gradually favored by capital. Compared with commercial real estate properties such as shopping centers and office buildings, tenants in logistics parks usually have stronger leasing ability, larger average leased area, and more stable tenant mix, so the market resilience is better. From the perspective of return on investment, logistics usually exceeds 6%, which is higher than office buildings and shopping mall assets.<\/p>\n<\/div><\/div>\n\n

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In the field of large-scale commercial investment, the proportion of logistics has also increased year by year. Zhou Ying, head of JLL\u2019s Zhenquan Research Institute, told 36Kr that the proportion of logistics in China\u2019s large-scale transactions has risen from 5% in 2019 to 21% in 2021. %, and it is expected to stabilize at about 20% in 2022. Logistics parks are becoming a major commercial real estate second only to office buildings.<\/p>\n<\/div><\/div>\n\n

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At the same time that Blackstone expanded its logistics footprint in China, GLP, CapitaLand, and Goldman Sachs also increased their logistics investment and mergers and acquisitions respectively.<\/p>\n<\/div><\/div>\n\n

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On November 7, GLP announced that the latest phase of China Income Fund – GLP China Income Fund VI (GLPCIFVI) has completed its fundraising, with a scale of 7.6 billion yuan. The fund will invest in 20 logistics parks in 19 cities in China, with a leasable area of about 2.13 million square meters.<\/p>\n<\/div><\/div>\n\n

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CapitaLand recently established two onshore RMB funds, namely CapitaLand China Industrial Park Core RMB Fund Phase I and Phase II (CBPCF I and CBPCF II), with the size of the two funds being RMB 380 million and RMB 3.6 billion respectively RMB, with a total scale of about 4 billion yuan, will focus on investing in industrial park projects in China. CapitaLand stated that this move is in line with CapitaLand’s strategy of moving towards new economic assets, including industrial parks, logistics warehousing and data centers, etc., to enhance long-term business resilience.<\/p>\n<\/div><\/div>\n\n

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Senyao China and Goldman Sachs Asset Management also announced that the two parties have jointly established a joint venture company to seek opportunities for high-quality logistics assets and other new infrastructure investment in China’s first-tier cities and surrounding core areas.<\/p>\n<\/div><\/div>\n\n

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Peter Hwang also told 36Kr: \u201cDragonCor is well-positioned to benefit from these tailwinds, having built a robust platform in the space and trust with our tenants. In addition, having Blackstone\u2019s support is a major advantage \u2013 Blackstone was one of the earlier investors in logistics, having started investing in the sector more than 12 years ago. Today, the firm has built large-scale platforms across Asia, the United States, and Europe.\u201d<\/p>\n<\/div><\/div>\n\n

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Regarding the current competitive landscape, Zhou Ying believes, “The current logistics landscape is becoming more and more differentiated. Investors in various roles, whether private equity, traditional logistics companies or Internet companies, need to choose suitable investment targets according to their own investment strategies and advantages. thing.”<\/p>\n<\/div><\/div>\n\n

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This is a translated version. The article originates from 36Kr.<\/p>\n<\/div><\/div>\n\n

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https:\/\/36kr.com\/p\/2045246645603328<\/a><\/p>\n<\/div><\/div>","protected":false},"excerpt":{"rendered":"

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