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Korean conglomerate invests $333m for ESR stake

Investment group SK Holdings has agreed to acquire a 10% stake in logistics specialist fund manager e-Shang Redwood, joining APG and Warburg Pincus among others as shareholders.  

SK Holdings, the investment arm of South Korean conglomerate SK Group, has made a $333 million equity investment in e-Shang Redwood (ESR) for a 10 percent diluted stake.

With this entity investment, SK Holdings joins the global private equity firm Warburg Pincus and the Dutch pension fund asset manager APG, among others, as a shareholder in the pan-Asia logistics real estate developer, owner and operator.

Equity International, Sam Zell’s investment firm, also held a 12 percent stake in ESR, as PERE had reported earlier. However, ESR’s founders are understood to have bought out its stake around a year ago.

This is SK Holdings first investment in the logistics real estate sector, according to an official statement on the partnership. Through its global operations, the South Korean group owns warehouses, manufacturing plants, research centers and office properties.

Explaining the rationale for the investment, Ho Jeong Lee, vice president of SK Holdings said: “ESR’s platform is highly complementary to our broader portfolio of businesses and this investment is also consistent with SK’s growth strategy and vision to become a ‘Global Investment Holding Company’ through active investment in market leading companies across SK’s supply chain. We believe the investment in ESR will not only bring long-term sustainable return for SK but it will also provide strong support for our warehousing needs in Asia.”

For ESR, the partnership will help it to leverage SK Holdings’ presence in South Korea, a key target market for the firm. As of March, 2017, Korea accounted for 10 percent of ESR’s overall portfolio.

ESR is currently investing in the country via the $1 billion joint venture platform set up between CPPIB, APG, and e-Shang in late 2015, before e-Shang and Redwood merged.
The latest investment in ESR follows the $300 million pre-IPO preferred equity investment raised from a consortium of Chinese investors, including China Everbright and Huarong International, in January this year.

Jeffrey Perlman, managing director at Warburg Pincus, did not disclose the definitive timeline for when the firm would initiate an IPO, but told PERE that it is certainly a near-time horizon, given that the company continues to grow, and expand its geographical footprint in Asia.

Southeast Asia is one region where the firm is looking to prioritise, on the back of the January acquisition of an 80 percent stake in a Singapore-listed industrial REIT, the Cambridge Industrial Trust Management, and a full indirect interest in the property manager of the REIT.

As of June 2017, ESR was managing 8.4 million square meters of projects with US$9.0 billion of assets under management across China, South Korea, Japan and Singapore.