Canada and Dutch pension funds to launch $1 bn Korean logistics JV with ESR

Canada Pension Plan Investment Board (CPP Investments), the Netherlands’ APG and China’s logistics property developer ESR have agreed to set up a $1 billion joint venture to invest in logistics facilities in South Korea, which are in higher demand with the rapid growth of the e-commerce industry.

CPP Investments, APG and ESR will inject $450 million, $350 million and $200 million respectively into the venture, they said in a joint statement on April 23. They may make an additional commitment later on to double its equity capital to $2 billion.

The venture, dubbed ESR-KS II, is their second venture formed to invest in South Korea’s logistics facilities, following a $1 billion platform that was later upsized to $1.15 billion and has developed 17 projects in the country.

The latest vehicle will invest in and develop industrial and warehouse logistics assets in the Seoul and Busan metropolitan areas, the two largest metropolitan cities in South Korea.

"Asia's consumer sector has been one of our key investment themes. The continued growth of South Korea's e-commerce market is driving the demand for quality logistics facilities,” Jimmy Phua, Head of Asia real estate at CPP Investments, said in the statement.

The venture will be managed by Seoul-based Kendall Square Asset Management Inc., part of a joint venture between ESR and Warburg Pincus.

ESR, short for e-Shang Redwood, is Asia’s largest logistics real estate investor. South Korea’s oil refiner SK Corp. is the second-largest shareholder in ESR with a stake of about 10%.

APG is the Netherlands’ largest pension administration and manages about 533 billion euros in pension assets. CPP Investments manages 420.4 billion Canadian dollars.

In 2015 Kendall Square Asset Management set up a $500 million joint venture with APG and CPPIB to invest in logistics properties in South Korea.

Meanwhile, Kendall Square applied for regulatory approval in February to list a domestic real estate investment trust in Seoul to raise 800 billion to 1 trillion won ($650 million-$810 million) in the second half of this year.

If listed, it will become the first listed REIT backed by logistics assets and the largest REIT on the Korean stock market.

Write to Seonpyo Hong at rickey@hankyung.com