APG Asset Management, the Dutch pension asset manager, and Canada Pension Plan Investment Board (CPPIB), the Canadian pension fund, have formed a $500 million joint venture platform to invest in logistics assets in the country.
The two investors have partnered with the Shanghai-based logistics developer, owner and operator e-Shang and its Seoul-based subsidiary, Kendall Square Logistics Properties (KSLP). A total equity commitment of $500 million has been made by APG, CPPIB and e-Shang in the platform, with an option to increase the size of the JV to $1 billion over time.
The deal marks both APG and CPPIB’s forays into the logistics sector in Korea. PERE has learned that APG owns the largest interest in the JV.
e-Shang and KSLP have secured two logistics real estate assets in the Seoul region that will be used to seed the JV, in addition to identifying a pipeline of development opportunities in the Seoul and Busan metropolitan areas. Over the next several years, the JV will target to own a portfolio of logistics real estate assets with an aggregate size of over 1.5 million square meters in gross floor area.
In a statement announcing the partnership, Sachin Doshi, managing director and head of private real estate investments, Asia Pacific at APG, said: “We believe this is an opportune time to enter the logistics sector in South Korea given the compelling fundamentals and supportive government policies for the development of modern logistics warehousing. Logistics continues to be a sector of particular focus for APG globally and this investment consolidates our substantial logistics positions in the Asia-Pacific region to an exciting new market that remains severely under-institutionalized. We are delighted to expand our relationship with e-Shang and KSLP, and welcome CPPIB to this JV”
He further added: “As the sector matures in Korea, we anticipate significant upside through rental growth and cap rate compression similar to what we have seen over the years in Japan and China.”
On its entry into the logistics sector, Jimmy Phua, managing director and head of real estate investments Asia for CPPIB, said: “This investment is a great opportunity for CPPIB to enter the growing and highly sought-after logistics sector in South Korea. Developing logistics facilities in a market like Korea – which is supported by increased trading volume and greater domestic consumption – is an attractive use of capital for a long-term investor like CPPIB. We are also happy to expand our relationship with APG to this JV”
In May, CPPIB made its first retail investment in South Korea when it formed a 50:50 partnership with GIC Private to acquire a retail mall in Seoul from the Korean firm Daesung Industries for $263 million.
In May last year, APG invested $650 million in e-Shang, part of which was used to form a joint venture partnership to develop logistics properties in China, and the remainder comprised the purchase of a 20 percent stake in the company. APG and e-Shang went on to further invest a total of $285 million in this JV in August this year.
In late 2014, e-Shang formed a partnership with Thomas Nam, who previously headed the South Korean operations for Prologis, and Jihun Kang, who led AMB’s operations in the country, to form KSLP to develop, acquire and manage a logistics real estate portfolio in the country.