Ascendas-Firstspace launches industrial real estate platform; to invest $500 mn in warehousing, logistic parks

Ascendas- Firstspace as a platform will invest in projects aimed at the development of logistics and factory spaces across several top warehousing and manufacturing hubs in India.

With the roll out of GST and the government’s push for initiatives like ‘Make in India’, one segment that is sure to benefit is the warehousing and logistics real estate space. Betting big on these initatives is Singapore based Ascendas-Singbridge, which for the first time has forayed into the industrial real estate segment in a joint venture with FristSpace.

Ascendas- Firstspace as a platform will invest in projects aimed at the development of logistics and factory spaces across several top warehousing and manufacturing hubs in India.

CNBC TV18’s Stacy Pereira caught up with Aloke Bhuniya, CEO Ascendas-Firstspace to understand this startegic partnership.

Q. Ascendas- Singbridge has been in the Indian Commercial Real estate for over 2 decades. Why venture into warehousing now?

A. Ascendas has been present in India mostly in the IT and business park side of the business but having said that Ascendas has been present in the logistics and industrial markets across the globe with significant focus on the APEC countries for some time now. In fact we own almost 30 mn sq ft of industrial and logistic space across the APEC countries. We have been looking at India and this space for growth for quite some time but given some of the recent events that are happening including the implementation of GST, growth of retail and e-tail business and the Make in India initative, we expect the growth to be multi-fold in the near future to come.

FirstSpace is an industrial real estate development platform which has been developing real estate in India for couple of years now, The joint venture is to bring strenghts from each sides, which is First Spaces’ on-ground capabilities, in terms of execution, land acquisition, approvals, client- relations etc and Ascendas’ global experience in terms of design based practises, client relations , corporate governance. The JV is looking to build close to 14-15 mn sq ft of logistics and industrial parks across the key markets in india over the next 5-6 years.

Q. Have you’ll already identified land parcels that you will build these facilities on?Or will you’ll reach out to others to acquire land or is this part of the profile for Ascendas- Firstspace?

A. This platform is going to be doing everything starting from land acquisition , design, construction , leasing and asset management. In terms of the land acquisition, we are already in various stages of discussion in our key target markets for acquisition opportunities. Some of those opportunities are in more advance stages than others and we expect to complete our 1st acquistion very shortly. Our area of focus are the Western and Southern parts of the country and thats where the first investment will happen.

Q. Ware housing facilities are often seen towards outskirts of cities. Which cities will you be targeting and who are the cliets you will be catering to?

A. We are looking at Mumbai, Pune NCR, Chennai Bangalore and Ahemdabad as the Key markets. Apart from that we will be looking at opportunities and investments in markets like Kolkata and Hyderabad. Clients would be in the manufacturing side be it auto, electrronics or white-goods manufacturer. Or from the consumption side it could be retailers or e-tailers, it can be 3PL operators or from the FMCG sector.

Q. Building industrial real estate facilities of this magnitude will need some big investments, what is the capital that will be invested in this new entity?

A. The total investment that we are envisaging is going to be anywhere between $500 to $600 mn for these developments. It is going to be a mix of debt and equity. The equity part of the investment is already identified and we are going to be putting this money over the next 5 to 6 years.

Q.With 100% FDI permitted in warehouses and food storage facilities under the automatic routes, how do you plan on taking advantage of this?

A. As a platform we want to develop this space.Right now, we have all the expertise needed between the 2 partners. However, on project -to project basis there we do not rule out possibilities of local partnership with individuals or a group of developers depending on the situation.

Q. Last year there were talks of Ascendas floating a Private Equity fund that would back warehousing and logistic parks, is there any update on that front?Will that be taken up by Ascendas- Firstspace?

A. Any developments in the industrial and logistics space will be looked after by the new entity. This is part of the larger scheme of things, so whether it is a separate fund or whether its a segregated capital or any other capital play all industrial logistics developments will come through this platform

Q. What is your outlook for the future with regards to the warehousing and logistics space in india?

A. With the governments push through initiatives like Make in India where the government expects the manufacture sector to contribute towards 25% of the GDP, or the growth in the e-tailing segment which is looking at 40-45% on a Y-oY growth or the growth in consumption where we are looking at the retail segment to be grow at 20% CAGR, we see a significant amount of demand and also with GST coming in, it is going to drastically change the way the warehousing industry operates in India over the next 5-6 years.

Given the situation I think there is place for more than couple of investors or operators to be in this particular space and so we are looking to exploit this opportunity. We want to play a pivitol role in the industrial real estate space and hence we though now was the right time to get into this segment.

About the author: Vijay Kumar Gupta

Vijay Kumar Gupta, has more than 20 years of industry experience into various industry domains. He is an MBA in Real Estate & Urban Infrastructure from RICS School of Built Environment, accredited by Royal Institute of Chartered Surveyors.