CPPIB Teams With Mangrove Operator MGRV on $350M Korean Rental Housing JV

The Canada Pension Plan Investment Board and Seoul-based apartment specialist MGRV have launched a KRW 500 billion ($350 million) joint venture to develop rental housing projects in South Korea.

For its first direct investment in the Korean residential sector, the manager of Canada’s public retirement fund has committed up to KRW 133 billion to the JV’s seed projects in Seoul, the parties said Thursday in a release.

Toronto-based CPPIB will hold 95 percent of the venture, with the remainder to be held by MGRV, which develops and operates rental residential projects under the Mangrove brand. The partners aim to develop properties in key corridors of Seoul, close to major business districts and leading universities.

“This joint venture offers an excellent opportunity to enter the residential sector in Korea and meet the strong demand for high-quality rental housing in the greater Seoul area where half of Korea’s population resides,” said Sophie van Oosterom, head of real estate at CPPIB. “We are pleased to work alongside an experienced local partner like MGRV to enter this market segment, which we believe can generate attractive long-term returns for the CPP Fund.”

Evolving Market

CPPIB’s splash in the rental housing market comes as South Korea seeks to ease constraints on commercial operators with measures announced by the government last August, according to a Savills report. The plan calls for relaxing some of the main restrictions, including rent control and high corporate tax rates, while offering benefits like lower acquisition and property taxes.

MGRV operates six Mangrove branches nationwide with a capacity of 1,200 people. The partnership with CPPIB marks a significant step in demonstrating the high growth potential of the Korean rental housing market and MGRV’s operational capabilities on a global scale, said CEO Cho Kang-tae.

“We will continue to drive the ecosystem innovation in the market by expanding community-centred properties,” Cho said.

In its annual report for the 12 months to the end of last March, CPPIB indicated that it would be allocating a smaller portion of the pension fund to real assets and emerging markets.

The $467.3 billion fund’s recent real asset investments have favoured alternative sectors such as digital infrastructure over commercial property or other more traditional strategies. CPPIB joined with Blackstone late last year to acquire Australia’s AirTrunk in a deal valuing the data centre operator at A$24 billion ($16.1 billion).

Seoul Searching

The Canadian giant has some company as it explores Seoul opportunities, with Hong Kong-based operator Weave Living having teamed with private equity major KKR last year on a rental housing platform focused on the Korean capital.

The partners have acquired two assets under their joint venture: the State Sunyu hotel near Seoul’s Yeoido business district, repositioned as the 157-unit Weave Suites Sunyu Parkside, and the UnivM officetel building in Dongdaemun district, reworked as the 98-unit Weave Place Hoegi.

The platform aims to build a Seoul-centric portfolio of 1,200 rental homes as part of Weave’s expansion to over 5,000 owned and managed units in Tokyo, Osaka, Singapore, Hong Kong and other select gateway cities by 2025.