APG and CPPIB Set Up $500M JV for Korean Logistics with e-Shang

Chinese warehouse developer e-Shang continued to boost its bid to become a major player in Asia’s regional logistics real estate market this week as the Shanghai-based startup announced a $500 million joint venture with Dutch pension asset manager APG Asset Management and Canada Pension Plan Investment Board (CPPIB).

The new JV will bring together the two fund managers with e-Shang and its Korean subsidiary Kendall Square Logistics Properties (KSLP) to develop warehouses across South Korea, following the success of e-Shang’s China-based logistics platform.

The investment follows e-Shang’s decision in 2014 to set up Kendall Square as a subsidiary in Seoul, and is the second major investment by APG into the Warburg Pincus-backed warehouse builder and operator.

From 2011 to 2 Million Square Metres

e-Shang was founded in 2011 by global private equity firm Warburg Pincus and two Chinese entrepreneurs to take advantage of the demand for international-grade logistics space being created by China’s rapidly expanding retail sector. Since that time, the company has become one of the mainland’s biggest developers, owners and operators of warehouses, with over 2 million square metres in operation and under development across China.

Jeffrey Shen, CEO of e-Shang, commented, “We are very pleased to partner with APG again, and welcome a new investor, CPPIB, to the Korea venture. The logistics sector in Korea is poised to undergo a meaningful transformation of the value chain over the medium term and this JV is well positioned to take advantage of these emerging trends towards consolidation of space among more concentrated and larger distribution centers across South Korea.”

In June 2014 APG committed up to $650 million to acquire a 20 percent stake in e-Shang. For the Korean joint venture, the parties involved said in a statement that there is an option to upsize the JV to a total capitalisation of $1 billion.

E-Shang Moves into Korea

The Korean joint venture is a follow up on a partnership that e-Shang established in late 2014 to found Kendall Square with local logistics real estate veterans Thomas Nam and Jihun Kang. Nam previously served as head of South Korea operations for warehouse developer ProLogis, while Kang led rival developer AMB.

“This investment is a great opportunity for CPPIB to enter the growing and highly sought-after logistics sector in South Korea,” said Jimmy Phua, Managing Director and Head of Real Estate Investments Asia for CPPIB. “Developing logistics facilities in a market like Korea – which is supported by increased trading volume and greater domestic consumption – is an attractive use of capital for a long-term investor like CPPIB. In addition, we look forward to expanding our relationship with APG through this joint venture and to working with e-Shang and KSLP.”

e-Shang and Kendall Square are said to have identified a pipeline of development opportunities in the Seoul and Busan metropolitan areas and have already secured two assets in the Seoul region that will be used to seed the JV. The new company aims to build a portfolio of 1.5 million square metres of logistics space in Korea over the next several years.