Carlyle, Townsend to Invest $200M in JV with Shanghai Yupei to Develop Warehouses in China

By Gail Kalinoski, Contributing Editor

Citing the growth of the logistics sector in China, The Carlyle Group and The Townsend Group are investing $200 million in a strategic partnership with Shanghai Yupei Group that will funnel a total of $400 million to 17 projects and acquisitions in China’s main cities.

Carlyle, one of the biggest private equity firms in the United States, and Townsend, a provider of real estate investment management and advisory services, said they will acquire equity interests in five warehouses owned by Shanghai Yupei and build 12 new warehouses over the next two years. Shanghai Yupei, one of the largest logistics warehouse developers and operators in China, will also invest $200 million in the strategic partnership that will eventually yield more than 19.4 million square feet of space.

The 17 warehouses will be located in major logistics hubs across China, including Shanghai, Beijing and Guangzhou, and secondary markets including Shenyang, Tianjin, Chongqing and Hefei.

Shifa Li, chairman of Shangai Yupei Group, said in a joint news release that his company has a strong pipeline of development projects in major Chinese logistics hubs.

“The capital injection will allow us to further speed up land acquisitions and construction and to quickly expand our geographical coverage to better serve our tenants,” he said.

Carlyle’s share of the equity will come from Carlyle Asia Real Estate (CARE), which invests in value-add opportunities across Asia as well as in core assets for separate accounts. CARE, which has teams in Hong Kong, Shanghai, Singapore and Tokyo, has committed $2.2 billion of equity in Asia. In China, CARE has made 15 investments with an expected total capitalization of $3.1 billion.

“We are attracted to the logistics warehouse sector in China by its favorable demand and supply fundaments, and we are excited to work with Shanghai Yupei Group, one of the most experienced and highly regarded domestic logistics warehouse developers in China, to build a nationwide network of high-quality warehouses,” Jason Lee, managing director & head of Carlyle Asia Rel Estate, said in a news release.

Lee said the logistics warehouse sector in China “is supported by strong growth in domestic consumption, exponential expansion of e-commerce and favorable government policies.”

Nicholas Wong, principal of The Townsend Group, called the growth of modern logistics a “compelling secular investment theme in China, and around the globe” and described the strategic partnership as a “unique investment opportunity” for the firm’s clients.

The Colliers International Asia Real Estate 2013 Forecast said real estate prices in China were expected to continue to be strong in 2013, although down a bit in the 2 to 5 percent range compared to 5 to 9 percent increase in 2012. The report said the logistics sector in several of the cities the strategic partnership has targeted a positive outlook for 2013, including Beijing.

“The outlook of the property sector in 2013 should continue to be strong, with investment returns stabilizing over the next 12 to 24 months,” the report said of Beijing.

“Prospective growth for logistics warehouses in Guangzhou will be stronger than the other property sectors thanks to the support from purchasers who are planning to build manufacturing or machinery assembly facilities,” the Colliers report said. “In Shanghai, the local logistics warehousing sector will see more exciting growth thanks to increasing real estate requirements from overseas companies who are engaged in the specific industries (eg. high-tech manufacturing) preferred by the government.”