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Embassy partners Warburg Pincus to enter into warehousing business

Times of India:  October, 2015

Bengaluru: Real estate developer Embassy Group said it formed a $250 million joint venture (JV) with private equity firm Warburg Pincus to build warehouses across the country, tapping a largely unchartered path for organized players.

The JV, named Embassy Industrial Parks, includes equity investment of $175 million from the New York-based company and $75 million from Bengaluru-based Embassy. About 90% of the initial investment would be used for land purchases. This is Warburg's maiden foray into the warehousing business in India.

The market for modern industrial and warehousing spaces is rapidly expanding and is estimated to touch about 125 million square feet in the next five years, according to a report from property consultancy firm CBRE.

"We look forward to working closely with Warburg Pincus and leveraging their successful global experience in the industrial real estate class. This is an exciting new foray for the Embassy Group that allows us to move into a space that we expect to see grow tremendously, spurred by government policies, concepts like Make in India and the booming e-commerce industry," Embassy Group chairman and managing director Jitu Virwani said.

The JV would be aiming to build and lease 15-20 million square feet over the next few years, focusing on markets which include Mumbai, Delhi, Bengaluru, Ahmedabad, Pune and Chennai. Embassy Industrial has already announced investment of Rs 900 crore for an industrial and warehousing park at Sriperumbudur off Chennai with Canadian private equity company Brookfield Asset Management.

Anshul Singhal, chief executive of the joint venture, said the company would be looking to procure land parcels between 50 acres and 200 acres in Sanand near Ahmedabad, Chakan near Pune and Hoskote in Bengaluru. The company would also be looking for about 100 acres of land each in Mumbai and Delhi.

"We would be focusing on industries such as FMCG, retail, automobile ancillaries, third party logistics (3PL) and of course e-commerce, which is expected to grow about 10 times to $60 billion by 2020," Singhal said. The implementation of the Goods and Services Tax (GST) is also expected to boost the demand for organized warehouses, he added.

The first warehouse is expected to become operational by early 2017, considering that it takes about six months to acquire land, six months to get approvals and another five to set it up.