Welspun One

About

Welspun One Logistics Parks (WOLP) is an integrated fund, asset, and development management organisation delivering large-format, institutional Grade A warehousing & industrial parks across India.

Welspun One is backed by a large conglomerate, the Welspun Group-which has been delivering industrial projects for over three decades. They have the ability to leverage several operational synergies across areas such as land acquisition & conversion, liaising, procurement, financing, project management, and operations. They are well positioned to mitigate key risks such permissions, due to deep local understanding. They have a management team with decades of experience in the real estate sector.

Key staff

  1. Anshul Singhal ,MD of Welspun One Logistics Park. Anshul has over 15 years of leadership experience in the infrastructure and real estate sector with a track record of establishing 5 new businesses from the ground up. He has held the CEO and Director positions for Blackstone, Warburg Pincus, and Brookfield investee companies. 

Investment Philosophy

  • Flexible, scalable spaces

Delivering spaces that provide clients with the flexibility and scalability that they require to meet their business and growth requirements.

  • Zero tolerance for non-compliance

We have a zero-tolerance policy for non-compliance. We maintain a gold-standard compliance policy for statutory, legal, construction, health, safety, and environmental regulations this forms the core of our internal value system.

  • Long-Term Lens for Real Estate

Obtaining the right locations is the key to effectively solving client requirements. This entails having a deep understanding of the future demand & supply requirements and connectivity and urban growth by working closely with clients, city planners, governments, and other stakeholders, to remain ahead of the curve in identifying upcoming markets.

Investment Process

  1. Step Process:

Step 1: Buy-Location:

  • Existing supply, demand, and vacancy. 
  • Connectivity to current and future road and rail networks. 
  • Distance from consumption centres, ports, and airports. 
  • Consumption potential of the serviceable region.
  • Social infrastructure and availability of skilled labour.  
  • State infrastructure and budgets.
  • Flexible spaces that can increase to 2x in short period of time in future
  • Due Diligence, Risk Assessment and Mitigation: Land title Zoning, planning permissions, and local building codes, Corporate, legal, and statutory norms, Financial and tax implications, technical and environmental factors before buying.

Step 2: Build:

  • Build Grade A parks
  • Build to suit:Client specific needs
  • Build to Spec: Foundation level built and remaining as per customer criteria thus ensuring 40% faster delivery
  • Ready to Move-in Spaces

Step 3: Rental:

  • Base Building Retal: Furnishing tenants with all basic and certain advanced requirements, such as developing the building’s primary structure, the building envelope, docking, and ensuring all safety and preliminary mechanical & electrical systems are in place.
  • Tenant Improvement Rental: We build our facilities in a manner that can be easily improvised to suit our client’s leasing requirements. 
  • Common Area Maintenance and Property management.

Welspun One Logistics Park Fund 1

About

Welspun One Logistics Parks Fund I, is a SEBI-registered Category II AIF with registration no. IN/AIF2/20-21/0841 is India’s first warehousing fund that provides domestic institutions, HNIs, family offices and NRIs, an opportunity to invest in the booming warehousing and industrial real estate sector in India.

Investment Philosophy

To source exclusive deals

To utilize extensive on-the-ground reach and relationships with landowners, customers, consultants and other market participants to source exclusive deals for clients.

Identify and mitigate investment risks

Leverage deep local understanding and experience corroborated with rigorous institutional processes, research, high-quality market data & analytics, to identify and mitigate underlying investment risks.

To deliver optimal returns

Deploy in-house underwriting expertise to effectively price and structure transactions to ensure alignment of stakeholders’ interest and deliver optimal returns.

Access asset level data

Drive investment returns through active and engaged asset management anchored around robust processes and technology platforms, which provide easy and transparent access to site level data across stakeholders.

Highest standards of corporate governance

Welspun One is built on a foundation of zero tolerance for non-compliance to local code, HSE and other regulations. Have the high standards of corporate governance, which is integral to long-term investment and finest organizational performance.

Investment Objective

The fund has a target size of INR 500crore with a tenure of 4 years and a hurdle rate of 15% with a significant commitment from the Welspun promoter family office of INR 75 crore. The fund is fully managed by Welspun One, key distributors of which are Sanctum Wealth Management, Edelweiss Finance and Incred.

Welspun One’s investment strategy is focused on sourcing and developing feasible land parcels which suit institutional investors and get leased by valued occupiers, whilst maintaining high levels of compliance, safety and zero tolerance to regulatory lapses across the project life-cycle.

The investment thesis of the fund is to acquire land parcels in high demand, pre-identified markets, and develop ‘Grade- A’ warehousing parks which will be leased on a long-term basis to ‘AAA’ credit tenants from sectors such as e-commerce, FMCG, third-party logistics (3PL’s), pharma and auto-ancillaries.

Their aim is to deploy the raised capital to develop about 300-acres of Grade-A warehousing and logistics space pan-India with immediate focus being seven cities namely Mumbai, Pune, Bengaluru, Chennai, Kolkata, NCR and Lucknow. This includes their under-construction flagship 110-acre park with a leasable area of approx. 3 million sq. ft. in Bhiwandi, Maharashtra.

Investment Strategy

Fund Update as on May 2021

The Fund had launched its first Scheme, Welspun One Logistics Parks Fund 1 in November 2020, and has successfully closed commitments of `355Cr as of Mar 31, 2021. As of date, the Fund has drawn down `136Cr, of which `77Cr has been invested towards its first investment.

Portfolio

Summary of the Fund:

1. Previously held by the promoters with clear marketable tittle

2. Signed an MoU with the State Government of Maharashtra under the Magnetic Maharashtra Initiative.

3. Flexibility to build independent and exclusive campuses within the larger facility.

4. Designed to global standards and Green Building Certification requirements.

5. Land is converted and approval under the “Integrated Logistics Park” or “ILP” policy has been received.

6. Pre-construction planning, design work and detailed budget is done, and land development work has

Commenced.

7. Lease commitments for ~0.9 mm sf (including 0.3mm sf of option) from a leading 3PL company.

Investment in the Fund:

The Fund has committed to invest `87Cr as primary infusion into the SPV, which will be utilized towards construction equity for the project; of this, `77Cr was invested on April 15, 2021. This transaction values the SPV at a pre-money valuation of `308Cr.

On a post-money basis, the fund will own a stake of 20% in the SPV (with the balance 80% being continued to be held by the Welspun Group promoters). 

The equity (ex-land) requirement above `77Cr would be invested by Fund and the existing shareholders in proportion of their ownership in the project.

Why Invest in this Portfolio:

Entry into a prime warehousing market, with excellent demand-supply dynamics:

  • Bhiwandi is one of the most important warehousing markets in India, catering to large urban consumption centres of Mumbai, Navi Mumbai and Thane.
  • It is well connected with key transportation infrastructure (JNPT port, Mumbai Domestic and
  • International airport, and Mumbai-Nashik National Highway).
  • Most of the existing warehouses in Bhiwandi are old, and lack modern offerings and compliances -–
  • Grade- A stock was ~7mm sf (~20% of the total stock) in Bhiwandi in 2019, resulting in excellent
  • demand-supply dynamics.
  • Moreover, there are significant entry barriers for even institutional players given limited availability of
  • large contiguous land parcels and local nuances associated with land acquisition.

Alignment of interest with existing shareholders:

  • The Fund’s investment into the project will only be in the form of primary infusion for funding the construction and development of the project.
  • There will be no cash out to the existing shareholders, who will only profit on exit post project completion, ensuring alignment of interest amongst all shareholders.

Attractive risk return profile given the project is highly de-risked at this stage:

  • Various key approvals, including Integrated Logistics Park approval, received
  • Detailed costing completed, contracts awarded and key contractors (civil/PEB) mobilized on site
  • Lease commitment of ~0.9mm sf, at underwritten rents, hence “proof of concept” on pricing established.

Media

  1. In an interview with ConstructionWeekOnline Vineet Vaibhav, chief development officer, Welspun One, elaborates on the advantages of Grade A warehouses

Link: https://www.constructionweekonline.in/people/15470-grade-a-warehousing-what-why-and-how?fbclid=IwAR3Twe6fTUbBYzUXZ5wEKGCxHE2HxFPlc1vXBob8HKnMha8hp78d39STX1k#

He explains that Grade A warehouses are those that lead to lowest Total Cost of Ownership (TOC). Every inefficiency in warehousing operation increases the cost of business thus resulting in higher TOC.

He explained the need as to why there is a shift to Grade A warehouses from Grade B or C. It is basically because of two factors which are scale and complexity which is inevitable for any growing business.

He also lists the technical specifications of a grade A warehouse which can be read by visiting the above link.

At the end he concludes about the steps involved in building a Grade A warehousing which are: map the clients, understand their operations, establish design considerations, execute the project through best construction teams and processes and finally, continue to manage the park for unhindered warehouse operations.

Thus reflecting the investment philosophy of the company which is primarily to develop Grade A warehouses.

  1. In an interview with ET Times on Jun 24, 2020 Singhal, the managing director of Welspun One Logistics Parks, said the company is soon planning to come up with first project in the Mumbai Metropolitan Region (MMR).

Link:
https://economictimes.indiatimes.com/industry/services/property-/-cstruction/welspun-one-logistics-parks-looks-for-land-parcels-in-big-cities-to-set-up-warehouses/articleshow/76553565.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Apart from this he said that the company is looking to acquire land in other major cities such as Delhi, Bengaluru, Pune and Kolkata, and even tier-II cities like Lucknow.

He believes that after the pandemic there is a behavioural change in the consumption pattern of the people as they are relying more and more on online purchasing thus increasing the need of warehouses in even cities for faster delivery.

This was reiterating the Investment Strategy of company which is on “Focused Cities”

Analyst Questions answered by Shriraj Bhukhanwala of Welspun Group

  1. A higher allocation to Built-to-Suit-to Development is done. Does it not increased the lead time when the client receives their return?

Answer: It does increase the time when investment is made in such type models but such funds has an investment cycle of around 4 years. So, investors are informed about the medium to long term philosophy of the fund. Also, it generally takes 9- 15 months to develop a warehouse with such models. 

  1. If a warehouse is pre-leased then how further investments are made which adds value?

Answer: It is true that investing in a pre-leased warehouses provides lesser yield as compared to Built to suit to model but they are suited for investors who want little risk and stable returns.

  1. As your main objective earning through leasing then why exit strategies are required?

Answer: To provide better returns (IRR) to investors. They exit at a lower capitalisation rate than at which they entered earning good profits. Then they move on to developing or investing in other warehouses which they think will allow them to add greater value than simply managing a warehouse and collecting rents.

Prepared by Sanjay Agarwal, June 2021

Source: https://www.welspunone.com/welspun-one-aif/ and 

Welspun One Logistics Parks Fund 1 Fund Update May 2021.

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