Allianz Real Estate (Allianz RE), the property investment arm of the Munich-based life insurer, has launched a strategic partnership with Singapore-based logistics specialist GLP.
The first step will be for Allianz RE to commit $600 million on behalf of several group companies to a recently launched fund and an existing fund focusing on China and Japan.
Rushabh Desai, chief executive officer in Asia-Pacific for Allianz RE, explained to AsianInvestor that it will commit a “roughly 50:50 split” between China and Japan.
The two funds of GLP, which has total assets under management of $64 billion, will focus on developing and investing in modern, large-scale logistics facilities across China and in the Greater Tokyo and Osaka regions in Japan, respectively. In addition, the strategic partnership is designed to help Allianz RE scale up its presence in China and Japan, Desai said.
Allianz RE’s efforts to invest in both countries mark a concerted effort to raise its exposure to the world’s second- and third-largest economies.
At the end of last year about 4.7% of Allianz RE’s €63.5 billion ($71.2 billion) global portfolio was invested in Asia Pacific. This was a little short of its stated intention to have a 5% to 10% exposure to the region, but when asked about this Desai responded that Allianz RE’s regional portfolio growth is in line with its broader diversification plan.
He noted that Allianz RE’s Asia Pacific interest in making further Chinese investments alongside GLP stem from the nation being one of most rapidly growing e-commerce markets in the world, coupled with growing middle class and continued urbanisation to help boost consumption demand.
“Given the strong fundamentals, the Chinese real estate market – in particular logistics – will likely outperform expectations over the long term,” Desai said.
Japan has its investment appeal as well, he added, noting the country “is underserved in terms of modern logistics facilities. The growth prospects look particularly strong in Greater Tokyo and Osaka regions”.
Logistics investments have gained appeal in Asia due to the rise of e-commerce and the relatively attractive yields compared to traditional commercial real estate assets such as office and retail, as AsianInvestor has previously reported.
Neither Desai nor GLP elaborated on the composition of the two GLP investment vehicles. A GLP spokeswoman explained that the funds include other investors but declined to mention specific names.
Prior to this investment, Allianz RE had exposure to China logistics via managers Shanghai-based Vailog China and New York-based Brilliant, and in Japan via Hong Kong-based ESR.
In addition, the German insurer has already invested in India logistics with ESR and in Australia with Sydney-based property group Charter Hall, and Desai suggested a variety of partnerships makes sense.
“Our primary objective is to secure attractive risk-adjusted opportunities for Allianz,” Desai said. “Sometimes this may happen via one large relationship and sometimes we prefer a diversified pool of partners. In addition, Asia-Pacific is a large region and experts differ by markets.”
GLP China, meanwhile, has secured support from other asset owners for its existing joint ventures in China. These include its $2.4 billion Value-Add Venture I fund, which gained investment from insurer China Life, and the $2 billion GLP China Value-Add Venture II, which was supported by GIC, the sovereign wealth fund of Singapore. GLP also closed the Hidden Hill Modern Logistics Private Equity Fund last year, a $1.5 billion commingled China fund with numerous institutional investors.
In addition, the logistics fund operator raised $5.6 billion for the GLP Japan Development Partners III fund last year, with Canada Pension Plan Investment Board among the investors. 2018 was a good year for GLP; its assets under management rose from $24 billion to $60 billion, including unrealised commitments.
Allianz RE and GLP did not disclose whether the $600 million the former is putting into the GLP funds would secure it influence on investment decisions, such as an advisory board spot or priority for possible co-investments. However, Desai pointed out that Allianz RE always prefers to get a certain amount of control.
“Governance rights are an integral part of our investment approach; however, we ensure that the expert manager has the responsibility - and flexibility - for the day to day operational decisions,” he said. “Furthermore, our rights are always aligned with our percent shareholding in the platform or fund.”
The story was updated to clarify Rushabh Desai's comments regarding Allianz RE's geographic diversification plan.