Dutch pension fund manager APG and CPP Investments have joined ESR Cayman to invest $2bn (€1.85bn) in South Korea’s logistics sector.
The newly created ESR-KS II development joint venture has secured an initial $350m, $450m and $200m respectively from APG, CPP Investments and ESR.
APG, CPP Investments and ESR will hold 35%, 45% and 20% of total issued shares, with options to increase total equity investment capacity up to $2bn.
ESR-KS II will invest in and develop an industrial warehouse logistics portfolio in the Seoul and Busan metropolitan areas.
Despite COVID-19, ESR has this year raised more than $2bn in three geographies – China, Australia and now South Korea – for new vehicles.
“Obviously, COVID-19 is having an impact on probably every business today,” said Jeff Perlman, chairman of ESR Cayman.
“One clear positive that does stand out in this environment is the resiliency of the logistics and industrial sector, given that it sits in the central nervous system as the core infrastructure for e-commerce.”
Perlman told IPE Real Assets said 60% of ESR’s tenants were in e-commerce or were third party logistics supporting e-commerce.
Perlman said two secular trends were converging to underpin the strength of the logistics and industrial sector.
First was a shift to shop online, which had accelerated during the current environment. The second was the significant flow of capital cycling out of other areas of real estate into logistics.
Most pension and sovereign wealth funds had 20-25% of their real estate allocation in retail and only 5%-10% in logistics and industrial, he said. “They want to get the latter up to 20-25%.”
The South Korean joint venture is APG’s fourth development collaboration with ESR, and the third for CPP Investments, which invests the assets of the Canada Pension Plan.
Graeme Torre, head of real estate, APG Asset Management Asia, said the latest venture with ESR would allow APG to capture the next wave of growth and opportunity in this sector.
“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,” he said.
Jimmy Phua, head of Asia real estate at CPP Investments, said the continued growth of South Korea’s e-commerce market was driving demand for quality logistics facilities.
The new joint venture would be key to the fund’s growth strategy in the logistics sector globally, he said.