ESR has announced the upsize of its second development joint venture (ESR-KS II) in Korea with APG and Canada Pension Plan Investment Board (CPP Investments).
ESR-KS II was established by APG, CPP Investments, and ESR in June 2020 with US$1 billion as the initial equity allocation and upsize options of bringing the total equity investment capacity to as much as US$2 billion.
ESR-KS II is a development joint venture which invests in and develops a best-in-class industrial and warehouse logistics portfolio in the Seoul and Busan metropolitan areas, the two markets with the largest populations and highest consumer spending in Korea.
APG, CPP Investments and ESR agreed in 2020 to initial investments in the joint venture in the amounts of US$350 million, US$450 million and US$200 million, representing respective holding of 35%, 45% and 20% in the joint venture.
The joint venture has deployed over 80% of the initial US$1 billion equity allocation in less than two years with over 1.3 million sqm of class A warehouse space under development.
The joint venture is a successor vehicle to the US$1.15 billion maiden development joint venture (ESR-KS I), of the trio in Korea. To date, a total of 3.9 million sqm of class A warehouse space has been developed (or under development) by ESR-KS I and ESR-KS II.
ESR-KS I has divested 30% (by total equity) of its completed properties to ESR Kendall Square REIT to date, generating total proceeds of over US$1.38 billion.
Thomas Nam, CEO of ESR-Kendall Square, ESR’s South Korean platform, said: “Institutional investment in the Korean logistics sector remains very strong as investors continue to rebalance their allocations towards logistics assets against the backdrop of e-commerce acceleration. The upsize of ESR-KS II reflects the collective confidence of our capital partners in ESR’s ability to capitalise on this secular opportunity. We will continue to build on our capital management and development strengths to identify quality opportunities and create value for our investors and stakeholders.”
Jeffrey Shen and Stuart Gibson, Co-founders and Co-CEOs of ESR, said: “As the largest real asset manager in APAC, ESR’s integrated fund management platform has provided its capital partners with access to some of the world’s best secular growth opportunities propelled by the positive trends of e-commerce, digital transformation and financialisation of real estate. We are delighted to successfully upsize another vehicle with our longstanding capital partners and extend our track record of delivering consistent strong performance across our APAC portfolio.”
Graeme Torre, Managing Director and APG’s Head of Real Estate, Asia Pacific, said: “The Korean logistics market has shown its resiliency during the pandemic, while demonstrating healthy growth prospects underpinned by robust growth in e-commerce and third-party logistics. We continue to be supportive of the sector, which complements very well with our existing regional logistics exposure and offers very strong risk-adjusted returns that will benefit our pension fund clients and their participants. With ESR’s leading track record and expertise in the local market, as well as their ESG credentials, we are pleased to continue our partnership with ESR and CPP Investments.”
Gilles Chow, Managing Director, Head of Real Estate North Asia at CPP Investments, said: “Korea is one of the most sophisticated internet and e-commerce markets globally. We continue to see strong demand for quality logistics assets in the country. We are delighted to expand our successful partnership with APG and ESR to further capitalise on opportunities in the sector, which we believe will deliver steady, long-term returns for the CPP Fund.”
ESR-Kendall Square, ESR’s South Korean platform, is the largest logistics owner in the country with US$9.2 billion of assets under management (AUM) and 4.3 million sqm of GFA as of 31 December 2021.