The Canadian pension fund, Canada Pension Plan Investment Board (CPPIB) has agreed to form a joint venture with an initial investment of $500 million with IndoSpace, one of India’s prominent warehousing companies and owned by private equity fund Everstone Group. One of the world’s largest asset managers, CPPIB will hold a “significant majority stake” in the joint venture called IndoSpace Core which will focus on acquiring and developing modern logistics facilities in India. IndoSpace Capital Asia will manage the new entity. As part of the JV, IndoSpace Core has committed to acquire 13 well-located industrial and logistics parks totalling about 14 million square feet, from current IndoSpace development funds.
The first nine facilities of around nine million square feet will be acquired at the closing of the transaction, and the additional facilities within 24 months, a statement from CPPIB said. IndoSpace Core also has the option to acquire additional industrial and logistics parks totalling around 11 million square feet, which are currently being developed by IndoSpace funds and are worth approximately $700 million. IndoSpace Core will also look to acquire mature assets from third parties across India.
Commenting on the deal, Andrea Orlandi, managing director and head of real estate investments (Europe), CPPIB, said, “The strong fundamentals underlying the Indian manufacturing and retail sectors and growth in e-commerce, combined with the low stock of high-quality modern industrial real estate in the country, makes this a compelling investment opportunity. This joint venture gives us immediate scale and access to a significant development pipeline in a rapidly growing sector.” The warehouses are located in industrial and logistics hubs in Chennai, Pune, Mumbai, Delhi and Bengaluru.
Sameer Sain, co-founder and managing partner, Everstone Group, said, “IndoSpace is excited to partner with CPPIB. The combination of our expertise and a strong macro backdrop, including Make in India, the GST rollout and growth in e-commerce, will provide significant opportunities for this joint venture.” Industry experts say that with the implementation of Goods and Services Tax (GST) round the corner and Real Estate Investment Trusts (REITs) likely to be a reality soon, the warehousing sector is looking at bright days ahead, with a lot of consolidation on the anvil.
In fact, the total warehousing space requirement in the country’s top seven markets — Mumbai, NCR, Bengaluru, Chennai, Pune, Hyderabad and Ahmedabad — is expected to grow from 621 million sq ft in 2016 to 839 million sq ft by 2020, according to a Knight Frank India report. At present, 17 m sq ft of space is transacted in these seven warehousing markets, with the auto & auto ancillary and chemical & pharmaceutical sectors being the largest demand drivers.