Warburg-backed e-Shang Redwood to kick start India operations this year

real estate
Photo: Pradeep Gaur/Mint

Global logistics developer e-Shang Redwood (ESR) plans to secure almost 600 acres of land across various locations in India to set up industrial and logistics parks, and expects to launch its first project by the December quarter, a top company executive said.

ESR aims to invest around $100 million annually and is looking to either buy or form joint ventures for land parcels of 50-150 acres each with land owners or developers.

Warburg Pincus-backed ESR is one of Asia’s largest developers and operators in logistics and warehousing and 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.m. of assets in China, Japan, Singapore and South Korea.

“Industrial real estate is a complicated asset class that needs experience along with land acquisition and operational expertise. By end-2018, we will have 500-600 acres in our control and move into construction mode. We will build around 10-11 million sq.ft of land which will translate into 6-7 projects. Our first project will be launched either in Mumbai or Pune depending on which land deal closes first,” said Abhijit Malkani, co-CEO, ESR Advisers India.

Malkani and Jai Mirpuri, also co-CEO, manage ESR’s operations in India.

In June 2017, Mint had reported that 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. Last year, it decided to return to India with fresh investment plans.

This time, the mandate is to be one of the largest industrial and logistics developer in India by 2022. In the first phase, it will look at Tier I cities like Mumbai, Pune, Chennai, Bengaluru, Hyderabad and National Capital Region (NCR) where there is a lot of gap between demand and good quality supply.

“We will not have any exclusive pan-India joint venture but there may be project level JVs with someone who has land. We will do a combination of speculative built-up area and built-to-suit space and build the infrastructure in every park. The advantage we enjoy is that we have offices across Asia with India desks in China, Japan which gives us access to a global client base,” Malkani said. Speculative development basically implies building without any specific client or requirement in mind.

There is a lot of demand not just from multi-national companies but also from Indian companies, he added.

The warehousing and logistics sector, which attracted investments of more than a billion dollars in 2017, is witnessing huge interest in building businesses around steady rental income. Apart from Canada’s Brookfield Asset Management Inc. which is planning to enter the industrial real estate space, Sydney’s LOGOS Group and Assetz Property Group from Singapore partnered in 2017 and is scouting for land. Embassy Industrial Parks Pvt. Ltd, Ascendas-Singbridge Group and Mahindra Lifespace Developers Ltd also plan to build industrial parks and clusters.

Property advisory Knight Frank’s India Warehousing Report 2018 published on 1 March said NCR attracted the highest leasing transactions in the warehousing space at 6.5 million sq ft in 2017, followed by Mumbai at 5.2 million sq. ft. Leasing deals in the warehousing sector across key Indian markets rose to 25.7 million sq. ft in 2017, up 85% from the previous year.

“Post GST, there has been a spike in demand by almost 100% as companies who were till now in a wait-and-watch mode have now got into execution mode. For the first time, we are witnessing consolidation and expansion of warehousing space. This increase in demand from sectors like e-commerce, 3PLs, consumer durables, FMCG and manufacturing coupled with a requirement for larger-sized warehouses has opened up the field for more and more organised players,” said Balbirsingh Khalsa, national director—industrial and asset services, Knight Frank India.

This article was first published on LiveMint.com.