CPPIB and Goodman increase China JV by $500m

The Toronto-based pension plan and Sydney-based logistics developer have increased their allocation to their China joint venture by $500 million altogether, bringing its total equity to $1.5 billion.

The Canada Pension Plan Investment Board (CPPIB) and the Goodman Group have increased their allocation to Goodman China Logistics Holding (GCLH) by $500 million altogether, bringing the total equity allocation in the joint venture to $1.5 billion, according to a joint statement. Philip Pearce, Goodman managing director for greater China, also told PERE that the two investors also hope to increase the joint venture to $3 billion over the next few years.

The steward of the $176 billion Canada Pension Plan and the Sydney-based logistics real estate developer and investment manager have repeated the same allocation ratio they committed last August: $400 million from CPPIB, and $100 million from Goodman. The joint venture, founded in 2009, is focused on investing in and developing logistics properties across China.

This announcement marks the second time the two organizations have increased their allocation to GCLH since its inception. The $1 billion of capital previously committed to the joint venture has been almost fully committed, according to the statement – meaning the $500 million committed in August was deployed in under a year. Pearce said that he expects this next $500 million will be deployed in a similar timeframe based on the pipeline it currently has.

To date, GCLH has “exceeded its benchmark” by bringing in returns in excess of a 15 percent IRR, Pearce said. The joint venture has 17 logistics projects across seven tier I and tier II cities, and the portfolio has a 98.2 percent occupancy rate as of now. 

“Building on the strong momentum of the JV, CPPIB's additional equity investment provides further opportunity for acquisitions and is another step in our long-term partnership with Goodman,” Graeme Eadie, CPPIB senior vice president and head of real estate investments, said in the statement.

Commenting on the target market for GCLH, Eadie continued: “The fundamentals of the Chinese logistics sector remain compelling, with a visible pipeline for future projects fuelled by the demand for modern and efficient logistics facilities, rising domestic consumption and the growth of the Chinese e-commerce market.”

Goodman’s China platform specifically has in the past few months signed about 1.1 million square feet of new leases across projects in Beijing and the Shanghai area, and is developing 5.4 million square feet of logistic space altogether, according to Pearce. “The strong customer demand we are experiencing will see our development book increase to around 800,000 sqm [8.6 million square feet] over the next 12 months,” he added in the statement.

In Asia this year, CPPIB has been most active in Japan, increasing its joint venture with Global Logistic Properties (GLP) to $1.132 billion, and launching a $403 million Tokyo office co-investment venture with GE Capital Real Estate. Most recently, Goodman raised €550 million in institutional capital for its open-ended European Logistics Fund, though claimed there was demand for more than €900 million.