October 4, 2022

Fresh from a pivotal deal that transformed ESR into Asia’s largest property manager, chairman Jeffrey Perlman is bulking up on the physical assets that power Asia’s digital boom such as data centers, logistics hubs and warehouses.

It’s only taken 38-year-old Jeffrey Perlman of Warburg Pincus six years to become one of Asia’s premier real estate dealmakers. Since basing himself in Singapore in 2016, Perlman has overseen breakneck growth at Hong Kong-listed ESR Cayman. In that time, ESR’s assets under management have swelled nearly 1,800% to $140 billion, making it the world’s fifth-largest real estate manager by AUM and the biggest based in Asia. 

“There hasn’t been anyone who’s laid out a playbook for this. What we’ve created obviously engendered a lot of interest,” says Perlman from his Warburg Pincus office overlooking Singapore’s iconic Marina Bay Sands integrated resort. Perlman charts ESR’s strategic direction as chairman—a position he has held since 2019, when ESR listed its shares in Hong Kong—while concurrently overseeing the private equity firm’s Asia-Pacific real estate business as well as its Southeast Asia operations as managing director.

It was ESR’s takeover of Singapore’s real estate giant ARA Asset Management that catapulted the company into the ranks of world’s biggest property managers. In a deal started last August and closed in January, Singapore tycoon John Lim sold his ARA, with $95 billion in AUM, for $5.2 billion to ESR. In one fell swoop, ESR quadrupled its assets from $36.4 billion held at the time.

The transaction got done because it made sense for both sides. By combining with ESR, Lim and his longtime keystone investor, Singapore billionaire Chew Gek Khim, leveraged their stakes in the privately held ARA into a roughly 5% share each in a much larger publicly traded firm. ESR got scale in an industry where being bigger is increasingly better. “By merging the two [companies we] could create the Blackstone of Asia,” said Chew last year of the deal. The comparison is apt. ESR is now the world’s third-largest publicly held property manager behind only Blackstone and Brookfield. And Perlman aims to narrow the gap with those two North American giants. “We’re very much on their heels,” Perlman says.

ESR under Perlman is building a strong base of the physical infrastructure that supports Asia’s booming e-commerce and digital industries—in the form of data centers, logistic hubs and warehouses. It has built and acquired logistics facilities across the region to meet demand from e-commerce giants Amazon, Alibaba, Coupang and JD.com, among others, whose business has surged since pandemic-induced lockdowns in early 2020. This has helped ESR flourish at a time when many real estate companies are reeling from Covid-19 and as indebted Chinese residential developers face a cash crunch. While many of Asia’s property tycoons have seen the stocks of their companies hurt by the pandemic, ESR’s share price has risen 53% in the two and a half years since its IPO (and during the darkest days of the outbreak).

The strategy of developing real estate for new economy businesses—rather than building gleaming skyscrapers, swanky hotels or iconic buildings—is credited to Perlman, who was instrumental in cofounding e-Shang. The Shanghai-based company merged with Singapore’s Redwood Group in 2016 to form ESR, whose current market cap of $15 billion dwarfs some of Asia’s prominent property developers. “We wanted to be the go-to e-commerce developer and landlord, and that’s how we started,” Perlman recalls. “The vision was to start delivering logistics facilities and then build a capable fund management platform over time.”

ESR and ARA’s combined assets include $95 billion in private investment vehicles and 14 REITs valued at $45 billion—making it the largest REIT sponsor in Asia-Pacific. The enlarged entity owns and manages over 35 million square meters of properties across 28 countries, of which over 80% (measured by floor space) are new economy assets such as logistics warehouses and data centers.

“There hasn’t been anyone who’s laid out a playbook for this.”

Yet ESR might not have existed if Warburg Pincus hadn’t sent Perlman to Asia in late 2008 to help build its presence in the region after the collapse of the U.S. housing market sparked the global financial crisis. Perlman joined the buyout firm in New York in 2006, a year after starting his career on Wall Street as a property investment banking analyst with Credit Suisse First Boston, armed with a bachelor’s degree in business administration from the University of Michigan. Then an associate with Warburg Pincus’ global real estate investing team, he shunted to and from China, hunting for deals with the buyout firm’s mainland counterpart, now led by Ellen Ng. 

“I was going back and forth to Beijing and Shanghai, essentially living out of a suitcase,” Perlman recalls. As the business in China grew, Perlman spent more time in the country (clocking 250 days in 2010), and it made sense to consider moving to Asia. So, in 2011, he proposed to his then girlfriend, Elizabeth, with the pitch: “You’d see me a lot more if we move to Hong Kong.” By the time Perlman and his fiancé relocated there in late 2011, he had lined up a few deals in China, including the partnership between Warburg Pincus and logistics industry veterans Jeffrey Shen and Sun Dongping to form warehouse developer e-Shang. “Back then, warehousing was not a big market and there was a very limited supply of modern, institutional grade logistics facilities,” Shen, ESR cofounder and co-CEO, recalls. “We definitely saw the potential, especially with the rise of e-commerce.”

Perlman’s trailblazing career was inspired by his late parents, both lawyers. Father Michael Perlman—who worked as a real estate attorney in Michigan—encouraged Jeffrey to study business, just like his older sister Dana, who works as chief strategy officer and treasurer at New York-based fashion house PVH Corp., owner of Tommy Hilfiger and Calvin Klein brands.

While growing ESR’s regional footprint, Perlman was also instrumental in Warburg Pincus’ expansion into Southeast Asia. Anticipating fresh opportunities in the region, Perlman in 2015 proposed setting up a Singapore office to the firm’s CEO Chip Kaye—who started Warburg Pincus’ Asia business in 1994—and president Tim Geithner, a former U.S. Treasury secretary. 

Since 2013, Warburg Pincus has poured almost $3 billion across 15 companies in Southeast Asia. Among the most notable was its partnership with Vietnamese billionaire Pham Nhat Vuong’s Vingroup to form shopping mall developer Vincom Retail. It raised $740 million when it went public in 2017—Vietnam’s then biggest-ever IPO—before exiting in 2019. The buyout firm also strengthened its regional team, with managing director Saurabh Agarwal relocating to Singapore from New York in 2017.

Perlman himself moved to Singapore in 2016, using the city-state—where his two children were born—as a base to oversee Warburg Pincus’ investments. He considers Singapore the focal point of ESR’s enlarged business given ARA’s vast presence in the financial hub, which includes prized assets such as Suntec City, a sprawling development comprising a shopping mall, offices and convention center. “Perlman is ubiquitous,” Stuart Gibson, ESR cofounder and co-CEO, says in a separate video interview in January. “He is here and everywhere.” 

Besides forming ESR in 2016, Warburg Pincus that year also teamed up with Lim to take ARA private and delist the company from the Singapore bourse the following year in a $1.3 billion deal. Asked whether he was eyeing a potential merger of ESR and ARA when Warburg Pincus invested in the latter, Perlman says that while such a deal wasn’t on his mind then, he did invite Shen down to Singapore in 2017 to meet Lim. “I don’t think at that point there was a ‘we’re going to all join forces’ [mentality], but when you’re in the people business, and you can see how people get along, and you see the shared vision and the passion that they have, then things like this are possible,” Perlman says in a video call after the January completion of the ARA acquisition. Lim—who cofounded ARA with CK Asset’s Justin Chiu two decades ago—declined to comment for this article.

However, Perlman sat on the sidelines when ESR proposed to acquire ARA in August 2021, recusing himself from any deal discussions given his concurrent roles at ESR and Warburg Pincus, ARA’s biggest shareholder, according to Gibson, who together with Shen negotiated the deal last year. “He wants to be involved in deals, but he wasn’t in the room for this deal,” says Gibson.

On a pro forma basis, ESR and ARA’s combined net profit doubled to $347 million in the six months ended June 2021 from a year earlier, bolstered by strong leasing demand for its warehouse space from e-commerce companies and a booming fund management business. Earnings are expected to increase more than 15% on a compounded annual growth rate basis through 2025, underpinned by new economy assets and fees from asset management and property development, Morgan Stanley analysts Wilson Ng and Derek Chang wrote in a research note published in January.

“The largest secular trends are underpinning the growth of our business,” says Perlman, referring to the e-commerce boom, digital transformation and financialization of the real estate markets across Asia-Pacific. “The rapid growth of e-commerce has only accelerated during the pandemic.”

To solidify its position, ESR wants to go even deeper into new economy investments, and is pressing ahead with the construction of cloud kitchens, cold storage facilities, data centers and warehouses across Asia-Pacific. It has raised more than $10 billion in the past two years to fund these projects and is kicking off 2022 with the launch of two complementary funds that will raise as much as $2.5 billion to bankroll the group’s expansion into the booming data centers industry. Demand for facilities to house servers powering cloud computing and other digital platforms is set to double in Asia-Pacific in the next three to five years, according to property consultant Knight Frank.

ESR completed Asia-Pacific’s biggest warehouse at the height of the pandemic in June 2020. With a gross floor area of nearly 390,000 square meters, the six-story ESR Amagasaki Distribution Center in Osaka boasts amenities such as a childcare center, a private lounge and retail shops as well as ecofriendly features that include an onsite solar-powered electricity generator and charging pods for electric delivery trucks. The company is building its tallest and most advanced facility yet near Tokyo’s Haneda Airport. The nine-story ESR Higashi Ogishima Distribution Center will be the world’s first logistics facility that can deliver time-sensitive cargo using drones once the roughly 366,000-square-meter property is completed by March 2023. 

In China, where it has more than $13 billion in AUM, ESR this month bought portfolio of 11 warehouses with a gross floor area of 550,000 square meters in the largest such transaction in the greater Shanghai area, and is building 2.5 million square meters of new logistics and data center space across the country. Perlman sees more growth in China, undeterred by the potential meltdown of the mainland’s housing market after China Evergrande Group—the world’s most-indebted developer with over $300 billion in liabilities—defaulted on bond payments last year. “Residential is where all the tension is, the headlines are always on that,” he says. “New economy infrastructure has big government support behind it. They know they need more warehouses. They know they need more data centers.”

Higher interest rates could slow ESR’s blistering pace of acquisitions as the increased cost of capital is likely to reduce the pool of accretive deals in the market, says Vijay Natarajan, an analyst at RHB Singapore. However, “despite potential interest rate hikes, ESR is in a better position to navigate this market,” he adds. “[An] asset light platform and strong recurring income position it well to cushion the initial impact of higher interest rates.” The acquisition of ARA also strengthened its balance sheet. Net gearing fell to 34% following the deal’s completion from 62% in June 2021, giving the combined entity some headroom to issue more debt to fund fu-ture acquisitions, Credit Suisse said in a research note published in January.

Adding to organic growth, ESR sealed more than $10 billion of deals in 2021, its busiest year so far. Last April, it partnered with Singapore sovereign wealth fund GIC to buy a portfolio of warehouses across Australia for A$3.8 billion ($2.8 billion) from Blackstone in the country’s largest logistics property transaction, while investing in a $2 billion data center project in Japan the same month. In October, two months after announcing the ARA acquisition, ESR moved to merge their Singapore-listed entities ARA Logos Logistics Trust and ESR REIT.

“Jeff is a terrific dealmaker who uses his global experience to great success in Asia.”

Stuart Crow, CEO for capital markets in Asia-Pacific at JLL

Perlman says a scaled-up ESR, whose portfolio includes $59 billion of warehousing and data center assets, will be able to attract investors seeking to deploy capital to fewer managers. Global investors poured some $48 billion into logistics properties across Asia-Pacific in 2021, exceeding the previous high of $32 billion set the year before, according to a report published by property consultant JLL in February. JLL estimates the combined entity could potentially tap a market worth about $2.5 trillion across Asia-Pacific.

“Jeff is a terrific dealmaker who uses his global experience to great success in Asia,” Stuart Crow, CEO for capital markets in Asia-Pacific at JLL, says by email. An early mover in one of the fastest-growing sectors, Perlman “understands the granular details of assets and markets, but with an eye on how they fit into the financial markets of Asia,” he adds.

Although Perlman wants ESR to focus on new economy projects, he remains opportunistic in picking up more traditional assets for ESR’s portfolio. ESR is strategically positioned to absorb some office buildings and commercial properties into its REITs or private investment funds that large institutional owners such as pension funds or insurance firms may wish to sell to reallocate capital elsewhere, he says. 

Such reallocation, along with robust demand for warehouses and the potential to create newer and bigger REITs across Asia-Pacific, presents huge opportunities for ESR to sustain its growth in the coming years. It should also benefit from some larger secular trends. JLL projects the market cap of all REITs in Asia-Pacific will rise to $1.3 trillion by 2030, from about $400 billion currently, emulating the growth of the U.S. REIT market in the past two decades. Perlman sees ESR having the scale and expertise to profit from multiple trends in Asia-Pacific’s property markets, especially those driven by the new economy. “Digital transformation is ongoing in our daily lives,” says Perlman.  

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