Warburg Pincus-backed ESR to sign joint development pact with Lodha Group

Warburg Pincus-backed logistics developer e-Shang Redwood (ESR) is in the process of signing a joint development agreement with Lodha Group for an industrial park at the latter's township project Palava, sources said.

The luxury homes maker, Lodha Group, had last year announced its foray into the warehousing space with a 150-acre facility in its mega township project 'Palava' coming up in Dombivli in the neighbouring Thane district.

According to sources, ESR is likely to enter into a joint development agreement with Lodha for 90-acre of space in the Grade A warehousing industrial park, which will offer a floor space index of one.

Both Lodha and ESR refused to comment on the proposed deal.

"It will be a 60-year lease deal," a source told PTI.

Lodha is planning do develop the warehousing space in two phases and is likely to enter into an agreement with ESR for the first phase for 90-acre plot, sources said.

However, media reports suggested that Lodha Group had earlier said the company was in talks with three operators for a joint venture to develop Grade A warehousing space.

Palava is a 4,500-acre greenfield smart city in the Kalyan-Dombivli region being developed and managed by the Lodha Group. Its proximity to both the Jawaharlal Nehru Port (JNPT) and the upcoming Navi Mumbai airport makes it an ideal warehousing location for corporates.

Based out of Hong Kong and Singapore, ESR has been scouting for opportunities to re-enter the Indian market after it left the country following the global financial crisis.

Last year, ESR announced its investment of Rs 350 crore to develop 1.2 million sqft of industrial and logistics park in Chakan MIDC in Pune, which will offer both build-to- suit (BTS) solutions and standardised facilities.

According to an industry expert, 2018 saw Indian warehousing sector coming of age, outshining some of the conventional real estate asset classes and attracting global investors.

As per a study by JLL India Industrial Services, 2018 witnessed a 22 per cent y-o-y growth in total stock in Grade A and B warehousing space in top eight cities at 169 million sqft compared to 138 million sqft, a year ago.

Interestingly, the absorption clocked an unprecedented growth of 63 per cent y-o-y growth to 31.8 million sqft last year from 19.7 million sqft in 2017.

"The robust growth in absorption reflects demand outstripping supply and vacancies dropping below 10 per cent level for the first time ever," the report said.

The logistics sector, which is pegged at USD 160 billion is expected to grow to USD 215 billion by 2020 when the total Grade A and B stock is expected to increase to 344 million sqft, it said.

The study further report stated the investments in the warehousing sector increased to USD 5.5 billion in 2018 from USD 2.02 billion in 2017.

Among others, some of the key transactions of 2018 include Altico Capital investing Rs 650 crore in Renaissance Group's warehousing park in Bengaluru, Morgan Stanley bought majority stake in Pune-based warehousing and industrial logistics park developer KSH Infra for Rs 350 crore.