Canada Pension Plan Investment Board, Toronto, and APG Asset Management established a $500 million joint venture platform to invest in real estate across South Korea, confirmed spokesmen for the pension fund and Dutch money manager.
CPPIB and APG established the platform with logistics developer and operator e-Shang, and Kendall Square Logistics Properties, its Seoul-based subsidiary.
The joint venture will develop and own a portfolio of institutional-grade real estate, primarily warehouses. The initial capital consists of $500 million of equity commitments; there is an option to increase that to $1 billion.
A spokeswoman for CPPIB said its equity allotment will be up to $175 million for a 35% interest in the venture. CPPIB's real estate portfolio was C$34.4 billion ($25.7 billion) at Sept. 30, and the manager has other real estate investments in South Korea.
APG's total real estate portfolio is €35 billion ($37.7 billion) of assets, and already has a small exposure to South Korea through a number of funds. A source said APG's stake is 45%. The spokesman declined to comment.
In May 2014, APG announced an up to $650 million commitment for a roughly 20% stake in e-Shang and the launch of a joint venture to invest in logistics real estate assets across China. e-Shang was founded in 2011 by private equity firm Warburg Pincus and two Chinese entrepreneurs.
“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,” said Sachin Doshi, managing director and head of private real estate investments, Asia-Pacific, at APG, in a joint news release. “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. 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.”
CPPIB has C$272.9 billion of assets, and APG has about €400 billion of assets.