ESR Group Limited, through its wholly-owned subsidiary Sunrise Victory Limited, has entered into a Joint Venture (JV) with Chinachem Group to develop a prime cold storage and logistics facility at Kwai Chung in Hong Kong. As a leading property developer rooted in Hong Kong, Chinachem Group is extending its business to the logistics sector for the first time through this collaboration. Expected to be completed in 2027, the facility has a strategic location at the junction of Mei Ching Road and Container Port Road South, at Kwai Chung in the New Territories, easily accessible by established road networks to Hong Kong's central business districts, international airport, and the border to Mainland China.

It will be developed on a 55,245 square-metre site (with a new 50-year lease expiring in 2072), which ESR had recently won via a Hong Kong government land bid on 20 July 2022. To maximise the allowable Gross Floor Area (GFA) of 138,000 square metres, the JV will develop a seven-storey facility with two basement levels of carparks. In Hong Kong, there is high demand for logistics space, with vacancy rates at just 1.4% as at Second Quarter 2022 which is the lowest since Fourth Quarter 2014[1].

For the next four years, there is no new supply of cold logistics coming to the market, while approximately one million square feet of cold storage space is being taken out of the market and converted into data centres. Furthermore, with limited supply of new modern logistics to cater to the growing e-commerce demand in Hong Kong and to serve cross-border requirements to China, rents in Hong Kong continue to be well-supported with a 5% to 10% expected growth for 2022. As part of ESR's five-year ESG roadmap, ESR seeks to launch ESG initiatives such as increasing the rooftop solar power generation for its portfolio, in line with the Group's priority to further enhance energy sustainability towards a 50% increase in solar power generation capacity by 2025.

Chinachem has also established "CCG 3050+" with the commitment to setting Science-Based Targets in 2021, to set up a higher carbon reduction target for the group, for building a sustainable city and better future for the next generations. ESR will work closely with CLP, its strategic partner in Hong Kong, to promote the use of renewable energy for this JV project with Chinachem. For this new logistics facility, it is in the plan to have an approximate area of more than 3,000 square metres designated for Photovoltaic (PV) panels at the rooftop.

In addition, the facility will have several sustainable building features and targets to achieve at least a Gold or Platinum certification for BEAM Plus and Gold for LEED. 30% of the site area will be designated for greenery, including a rooftop garden. The carparking spaces will also come with Electric Vehicle (EV) charging capability and there will be a recycling irrigation water system for the landscape area.

Mayer Brown advised ESR Group Limited, through its wholly-owned subsidiary, on the formation of a joint venture with Chinachem Group (Chinachem). A club of five lenders comprising UOB, SMBC, MUFG, OCBC and CITIC Bank will provide the term loan facilities to fund the winning bid by ESR. The successful execution and delivery of this financing as well as the joint venture formation, which Mayer Brown advised on in just three weeks, is a testament to the strength and depth of the firm's capability in the real estate sector. The Mayer Brown team representing ESR was led by Hong Kong-based Real Estate finance partners Peter Ho and Eugene Wong and included: Real Estate - senior associate Sharon Tam and associate Noah Chung; and Corporate & Securities - partner Chester Wong, and associates Andrew Koon and Inez Ma.