ESR has agreed to sell a 30 percent stake in its Kwai Chung Cold Storage Logistics Centre project in Hong Kong to an unnamed “strategic investor” from mainland China.

With the transaction, ESR will reduce its own stake in the $1.4 billion project to 40 percent while continuing to act as investment, development and asset manager, the HKEX-listed industrial specialist said Monday in a release. ESR previously brought aboard local developer Chinachem Group, which acquired a 49 percent interest in the New Territories project for an undisclosed price in mid-2022.

The partners are building a seven-storey facility with a planned gross floor area of 138,000 square metres (1.48 million square feet) on the site at Mei Ching Road and Container Port Road South in Kwai Chung.

“We are pleased to bring on board a new investor and widen our partnership base,” said ESR co-founders and co-CEOs Jeffrey Shen and Stuart Gibson. “This being the first logistics development project in Hong Kong for our new investor is a strong testament to ESR’s capabilities to develop an exceptional product for Hong Kong’s new economy, driven by the rising e-commerce, imported food and pharmaceuticals sectors.”

Green Financing Sought

Kwai Chung Cold Storage Logistics Centre aims to meet strong demand for large-scale, high-quality cold storage logistics space in Hong Kong.

Warburg Pincus-backed ESR is seeking to achieve green building certifications for the facility, including LEED Core & Shell Platinum and BEAM Plus New Building Platinum. The company plans to obtain green financing for the development given its many sustainable features, such as a rooftop garden, recycling irrigation water system for the landscaped area and EV charging points at the carpark.

“It will set a new benchmark in the industry not only with its cutting-edge features such as automation but also a range of green features as companies look for more sustainable solutions in all aspects of their supply chain,” said Chang Rui Hua, managing director for business management and investment at ESR Hong Kong.

Shen and Gibson also tied the stake sale to ESR’s focus on an asset-light strategy, with the transaction enabling the group to accelerate capital recycling while continuing to earn fees as it expands its portfolio across Asia Pacific.

Cold Storage Hotspot

ESR acquired the site at Kwai Chung container port in July of last year for HK$5.26 billion ($668.7 million), marking the group’s second-ever project in Hong Kong. A month later it welcomed Chinachem as a partner, looking to tap the project management expertise of the firm led by executive director and CEO Donald Choi.

In June of this year, Warburg-backed fund manager Kailong Group announced the launch of its conversion of a Kwai Chung industrial building into a cold chain logistics centre after acquiring the property in 2022 from the family of late “Shop King” Tang Shing-bor.

Kailong and its partner, Reitar Logtech Group, expect the building to be the largest automated cold chain warehouse in Hong Kong, with a total floor area of over 200,000 square feet (18,581 square metres), upon completion in the second half of 2024.