Chinese retail giant Suning Commerce Group is partnering with a government-backed VC firm to set up a logistics real estate fund with a target size of RMB 30 billion ($4.5 billion).
The company announced that its wholly-owned subsidiary Jiangsu Suning Logistics, together with Shenzhen Capital Group Real Estate Funds Management, will jointly establish the vehicle with an initial fundraising target of RMB 5 billion ($753 million).
The first funding haul will be used mainly to acquire Suning’s mature warehouse facilities and other high-standard logistics properties, according to an announcement by the company. The funds will also go towards developing modern distribution centres.
The fund will give Suning an opportunity to step up its logistics investments, after the company failed to acquire Global Logistic Properties (GLP) in partnership with Warburg Pincus earlier this year. Singapore-based warehouse developer GLP gave the nod to an $11.6 billion buyout offer by a consortium led by the firm’s CEO in July, passing up on what was said to be a higher bid by Suning and the US private equity firm.
Shenzhen Capital Group Real Estate Funds Management is a limited venture capital firm set up by the Shenzhen government.
Logistics Fund Aims for 15 million SQ M Portfolio
Depending on the success of the initial fundraising effort, further rounds will target planned, under-construction and completed warehousing and logistics facilities, as well as mergers and acquisitions with other logistics firms, Suning announced.
According to the report, the new fund’s first three years will be dedicated to investment, followed by a two-year exit stage, and two renewal periods each lasting one year. The portfolio of warehouses under management is anticipated to reach 12 million to 15 million square metres.
The vehicle aims to generate an internal return rate of 8 percent per year. Suning SCGC Fund Management (Nanjing) will act as the fund manager.
Suning Builds Up Warehousing Prowess
Shenzhen-listed Suning, one of China’s largest non-state-owned enterprises, is striving to boost its logistics capabilities. The group’s Jiangsu Suning Logistics arm primarily serves Suning’s retail business but also provides warehousing and distribution services for over 1,000 companies nationwide, including Alibaba’s logistics unit Cainiao Network. This past January, the logistics firm said it was buying Hangzhou-based delivery company TTK Express.
Nanjing-based Suning, which has a network of 3,748 physical stores in China, is also looking to build up its bricks-and-mortar presence. Last week Suning Holdings Group announced a RMB 20 billion ($3 billion) partnership with China Evergrande, whereby the leading developer will provide commercial facilities to Suning as the retailer aims to add 5,000 physical stores with connections to its online platform by 2018.
The company saw revenue growth of over 35 percent year-on-year in the first three quarters of 2017 in its online-connected retail stores, according to Business Insider. Suning’s online retail transactions grew more than 55 percent year-on-year during the same period.