Blackstone Bets on India's Rising E-Commerce With Warehouse Deal
April 20 2021 - 8:29AM
Dow Jones News
By Peter Grant
Blackstone Group Inc., already the largest owner of office
buildings in India, is about to become one of that country's
biggest owners of warehouses, too.
The investment firm is on the verge of buying 3.5 million square
feet of industrial warehouses as well as development sites that
could house another 18 million square feet of logistics properties,
according to people familiar with the matter. The firm plans to
spend about $720 million to acquire the existing buildings and
develop the sites, the people said.
Blackstone and other big U.S. real estate owners such as
Prologis Inc. and Nuveen Real Estate have been gobbling up U.S.
industrial properties for many years, leasing these buildings as
fulfillment centers to capitalize on the explosion in
e-commerce.
Online retail growth, which has also supercharged the value of
industrial property in Europe and China, has been more modest in
India. Online shopping accounts for only 4% of retail sales in that
country, compared with 12% in the U.S. and 24% in China, according
to Prahlad Tanwar, logistics sector leader of KPMG in India.
But the pandemic is now accelerating Indian e-commerce because
people prefer the safety of shopping from home during Covid-19. A
new outbreak of the coronavirus in India has sent cases soaring,
forcing the government to order new lockdowns.
The Indian industrial market became more attractive to
international investors in 2017, after Prime Minister Narendra Modi
implemented a tax overhaul. Government investment in roads,
railways and other infrastructure has also helped modernize the
country's logistics business.
Industrial property is also gathering strength in India because
global online retailers are ramping up in the country. The two
largest competitors are Amazon.com Inc. and Flipkart Group, which
was acquired in 2018 by a group led by Walmart Inc.
Other global players in the India industrial market include the
Canada Pension Plan Investment Board and Everstone Group, a
Singapore private-equity firm, which in 2017 formed a new venture
with IndoSpace, a local company focused on logistics.
Blackstone, which already owns 18 million square feet of Indian
industrial property, typically buys property and rarely develops
from the ground up. But development is a big part of its India
strategy because the country offers few large modern warehouses and
distribution facilities for sale, according to Christopher Heady,
the head of Blackstone's Asian real estate group.
"You're talking about a country with one billion plus people
with hardly any modern warehouses," he said. Mr. Heady declined to
comment on the pending deal.
Some global investors have run into problems in previous cycles
when forming ventures with local Indian partners that turned into
feuds.
Mr. Heady noted that Blackstone has successfully worked with
Indian companies in the past on office developments. "Although it
has some of the risk you typically experience with development, the
growth justifies that," he said.
Blackstone is planning to purchase the portfolio from a venture
of Warburg Pincus LLC and Embassy Group, according to people
familiar with the matter. Embassy is one of India's largest
property companies and a partner of Blackstone's in previous
deals.
Blackstone has been both a buyer and a seller of logistics
properties in the Pacific Rim region. On Sunday, a venture of Hong
Kong-listed ESR Cayman Ltd. and Singapore sovereign-wealth fund GIC
Pte. Ltd. said it had purchased a Blackstone industrial portfolio
in Australia for $2.95 billion (reported as 3.8 billion Australian
dollars). The portfolio, named Milestone, has 45 assets.
Write to Peter Grant at peter.grant@wsj.com
(END) Dow Jones Newswires
April 20, 2021 08:14 ET (12:14 GMT)
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