CapitaLand Investment (CLI) and APG Investments Asia have entered into a joint venture (JV) to establish a self-storage platform that’s focused on the Asian market.
APG Investments Asia is the investment manager for the largest pension provider in the Netherlands.
The partners will be committing an initial equity investment of $570 million to fund the acquisition of Extra Space Asia (ESA) and its expansion needs. The investment comes with an option to invest up to $1.14 billion in total. APG will be contributing 90% of the investment amount while CLI will come up with the remaining 10%.
ESA’s experienced management team will come with the acquisition.
Following the acquisition, ESA will be re-positioned into operating company/property company structure to facilitate future expansion.
ESA was founded in 2007 with two facilities. It has since grown into one of Asia’s largest storage businesses with about 70 owned and leased facilities across six Asian gateway cities including Hong Kong, Kuala Lumpur and Singapore.
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ESA’s portfolio comprises over one million sq ft of net lettable area (NLA) with an occupancy rate of over 90%. Over 70% of ESA’s net property income (NPI) is being generated in Singapore.
“The acquisition of the ESA portfolio will allow APG and CLI to achieve immediate scale across key Asian gateway cities with strong presence and brand recognition. The platform has also been allocated capital for expansion and will benefit from CLI’s global ecosystem of assets, customers and digital platforms to expand and grow the business,” reads the statement by CLI and APG on Oct 27.
According to CLI and APG, the self-storage industry in Asia is supported by strong fundamentals such as high urbanisation rates, high population density, an increasing proportion of renters and an explosive growth of e-commerce. The region’s much lower penetration rates compared to the mature self-storage markets in the US and Europe means there is a long growth runway for such platforms in Asia, say both parties.
In addition, both parties were attracted by the sector’s strong fundamentals and growth potential, as well as the belief that the sector’s fragmented nature in the region presents opportunities for consolidation.
“The self-storage sector is ideally accessed at scale and with local execution capability. This new partnership immediately offers us both. On behalf of our pension fund clients, we are delighted to be partnering with CLI and the ESA team to expand this platform throughout the Asia region. This asset class is fully aligned with the theme of urbanisation, which has been one of our core investment beliefs for many years and is a key tenet of our environmental performance aspirations,” says Graeme Torre, head of real estate for APG Asset Management Asia.
Patrick Boocock, CEO of private equity alternative assets, real assets at CLI, adds: “Self-storage is one of the alternative asset classes that has remained impressively resilient during the pandemic and looks set to continue benefitting from strong growth tailwinds supported by favourable demographics and lifestyle trends in Asia. This is an opportune time to enter the emerging sector with a new platform that will augment CLI’s funds under management and fee-related earnings. We view the self-storage platform as an extension of CLI’s logistics platform, well-positioned to capture the increasing demand for flexible storage and last-mile delivery requirements in tandem with the growth of ecommerce.”
Finally, Patricia Goh, managing director, Southeast Asia at CLI says, “As CLI grows as a real estate investment manager, we are pleased to embark on this strategic partnership with APG. CLI and APG are fully committed to the vision of creating a dominant Asia-focused self-storage platform that delivers long-term sustainable value to investors. Both parties will leverage each other’s strengths to grow this platform, with CLI contributing our expertise in fund management and operational know-how to manage the platform. With the foothold gained through acquiring ESA, we will next look at scaling the platform through mergers and acquisitions as well as conversion of existing assets into self-storage facilities.”
As at 3.52pm, shares in CLI are trading 3 cents lower or 0.95% down at $3.13.
