(May 29, 2014) — The asset manager of the largest Dutch pension fund has committed up to $650 million to a Chinese warehouse and logistics company, despite recent stumbles by the world’s second most powerful economy.
APG is to take a 20% stake in e-Shang and create a joint venture with the company to develop “institutional-grade, modern logistics real estate across China”, they said in a joint statement.
“We have watched this sector closely over the last few years and this investment is consistent with our strategy to gain the right exposure to the Chinese logistics real estate market,” said Sachin Doshi, head of non-listed real estate for Asia-Pacific at APG. “With the continued growth of third party logistics, e-commerce, and the evolution of domestic consumption patterns combined with a severe shortage in the supply of modern logistics facilities, we strongly believe that the logistics real estate sector in China will be a long-term beneficiary of these trends.”
e-Shang was founded in 2011 by two local entrepreneurs and backed by private equity group Warburg Pincus, which remains a partner in the company.
In December, banking group Goldman Sachs injected a $120 million loan into the company to prepare it for an eventual IPO. The owners of e-Shang said they planned to triple the size of the company’s portfolio over the “next several years”, before taking the company to public markets.
The company’s logistics services concentrate on the country’s three main industrial hubs—Shanghai, Beijing, and Guangzhou—but e-Shang has already pushed out to second tier cities in China.
However, despite the undeniable China growth story, some market forecasters have predicted problems ahead for the burgeoning economy.
AXA Investment Managers’ Strategist Adrian Yao said China’s economic achievement of the past decades had been a “miracle of unprecedented scale. However, with the recent economic slowdown and structural growth problems becoming more apparent, many fear that China’s growth miracle may be coming to an end”.
The country’s economic growth has fallen below its double-digit percentage achievements in the mid-2000s, with evidence of the economy becoming “unsustainable, uncoordinated, and unbalanced”, according to AXA. The asset manager suggested the governing parties needed to implement similar levels of structural reform that was seen during the last three economic cycles to get the country growing sustainably again.
The full AXA research paper can be found on the investment manager’s website.
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