Prologis Adds $882M to China Partnership

By Gail Kalinoski

Hamid Moghadam, CEO, Prologis

Prologis Inc. has made its fourth investment in five years to a joint venture with HIP China Logistics Investments Ltd. that hascommitted equity of more than $2.6 billion in China to build, acquire and manage logistics properties in the country. In the latest $882 million investment, HIP contributed $750 million and Prologis $132 million to Prologis China Logistics Venture.

Since the fund started in 2011, HIP—a subsidiary of the Abu Dhabi Investment Authority—has contributed 85 percent and Prologis 15 percent of the equity. To date, $93 million of Prologis’ $400 million in committed capital has been deployed. The firms said the new capital will fund the venture for the foreseeable future.

The last infusion of equity was made in July 2014, when Prologis announced it had contributed $88 million and HIP had invested $500 million.

“We have a trusted and growing relationship with HIP China Logistics Investments that continues to yield great benefits for both of us,” said James Green, managing director of Global Client Relations for Prologis.

Prologis also announced the signing of six lease agreements totaling 2.1 million square feet with three new and three repeat customers in the north, west and east regions of China. Five occurred in the fourth quarter of 2015 and the last was signed in January.

“China continues to provide us with excellent long-term opportunities for growth in our sector,” said Gary Anderson, CEO, Prologis Europe and Asia. “As the Chinese economy evolves from export to consumer based, we expect to benefit by targeting our investments in the top global commerce centers in the country.”

In an interview with CNBC last week about fourth-quarter 2015 earnings, Prologis CEO Hamid Moghadam downplayed concerns about China’s slowing economy.

“There is still a pretty spectacular rate of economic growth. Exports from China are definitely slowing down, but domestic consumption in China is growing at double-digit rates, and that creates warehouse demand in China, and we’re active in China,” Moghadam told the business network.

In late August, Prologis said it had signed five new development leases totaling 926,000 square feet in three Chinese markets—Suzhou, Chongqing and Shenyang. At that time, Anderson noted that demand in its target markets was broad-based and included both the e-commerce and consumer goods sectors.

“Our well-located Class A properties meet this demand by putting our customers close to the end consumer,” Anderson said then.

Prologis and HIP aren’t the only joint ventures making major investments in the Chinese logistics market.

In late December, Canada Pension Plan Investment Board and Goodman Group announced a $1.25 billion increase in their equity allocation to the Goodman China Logistics Partnership. The joint venture was established in 2009 to own and develop logistics assets in Mainland China.

Ivanhoe Cambridge and CBRE Global Investment Partners said in late June they were investing in the LOGOS China Logistics Club, which would make investments totaling up to $400 million. The joint venture was also formed with the strategy of developing and owning modern logistics properties in key Chinese markets, particularly to serve the growth of e-commerce in China.

Prologis is the global leader in logistic and industrial real estate with investments in joint ventures, properties and development projects totaling about 669 million in 20 countries.