The Canada Pension Plan Investment Board, alongside Dutch pension fund ASG and asset manager ESR Cayman Ltd., has entered into a new strategic agreement to establish a new development joint venture in South Korea with a total equity allocation of US$1 billion.
The joint venture, ESR-KS II, will invest in and develop an industrial and warehouse logistics portfolio in the Seoul and Busan metropolitan areas in South Korea.
ASG, the CPPIB and ESR have agreed to initial investments of US$350 million, US$450 million and US$200 million, respectively. They will hold 35 per cent, 45 per cent and 20 per cent, respectively, of the total shares of the joint venture. The partners also have allocation expansion options, which could bring the total equity investment capacity to as much as US$2 billion over time, according to a press release.
“Asia’s consumer sector has been one of our key investment themes,” said Jimmy Phua, head of Asia real estate at the CPPIB, in the release. “The continued growth of South Korea’s e-commerce market is driving the demand for quality logistics facilities. This new joint venture deepens our longstanding relationship with ESR and APG. It will be key to our growth strategy in the logistics sector globally.”
In August 2018, the CPPIB partnered with a subsidiary of ESR to invest in Korean logistics facilities. “Following the success of our first joint venture with ESR and CPP Investments in Korean logistics, we are delighted to be able to repeat the partnership,” said Graeme Torre, head of real estate at APG Asset Management Asia.
“This will allow us to capture the next wave of growth and opportunity in a sector that, even in these uncertain times, is demonstrating resilience. Throughout our global portfolio we look for investment opportunities that allow us to meet the long-term return and sustainability objectives of our pension fund clients. With like-minded partners such as CPP Investments and the local execution expertise of ESR, this new venture is perfectly placed to do just that.”
The transaction is expected to close before July 2020, subject to regulatory approvals.