CPPIB to Net $245M Selling Partial Stake in Korea Development JV With ESR and APG

The Canada Pension Plan Investment Board has agreed to the sale of a 21 percent partial interest in the Kendall Square Development Venture with ESR and APG in South Korea, with CPPIB poised to net $245 million in proceeds from the transaction.

The KDV I joint venture was set up in 2015 by CPPIB, Dutch pension fund manager APG and Hong Kong-listed ESR, with the Toronto-based institution’s initial investment amounting to $175 million, it said Tuesday in a release. The JV was upsized in 2018 and 2019.

The identity of the buyer wasn’t disclosed. CPPIB will remain an investor with a 24 percent stake in the newly formed ESR Korea Logistics Core Fund, a perpetual open-ended vehicle that will house KDV I’s stabilised assets.

“Korea is one of the most developed e-commerce markets in Asia with sustained demand for quality logistics facilities,” said Gilles Chow, head of North Asia real estate at CPPIB. “Through our longstanding partnership with ESR and APG, we have been able to capture opportunities in this space. The partial sale of our stake in KDV I allows us to monetise the investment to deliver returns to the CPP Fund while remaining committed to this important sector.”

Core Fund Emerges

The new perpetual fund’s seven seed assets have a combined gross floor area of 1 million square metres (10.8 million square feet) and are described as best-in-class warehouses in strategic prime locations, mainly in the Greater Seoul and Greater Busan areas. An ESR source identified the flagship asset as Bucheon Logistics Park, a 304,916 square metre facility in suburban Seoul’s Gyeonggi province.

ESR first revealed the newly formed fund last week. The fund manager’s Korean platform with CPPIB and APG dates back more than eight years to when the pension managers forged a $500 million development joint venture with ESR precursor e-Shang.

The partnership expanded in 2020 to launch a second development JV with $1 billion as the initial equity allocation. The partners upsized the venture to a potential $2 billion in equity investment capacity in 2022.

ESR and CPPIB also have their 2018-vintage Korea Income Joint Venture as a vehicle to invest in income-producing logistics assets in Asia’s fourth-largest economy. The two partners added $500 million to Korea Income JV in 2021, effectively doubling the size to $1 billion in total equity allocation.

AUM Expansion

The fresh boost to CPPIB’s kitty comes after the board last week reported assets under management of C$590.8 billion ($436.7 billion) for its fiscal third quarter, up from C$576.1 billion at the end of the previous quarter.

Contributions during the December-ended quarter included A$97 million ($63.5 million) in gross proceeds from the sale of a Perth mall to Hong Kong private equity powerhouse PAG. Midland Gate Shopping Centre marks the final asset disposition from Vicinity Retail Partnership, a joint venture set up with Australia’s Future Fund in 2010.

CPPIB also partnered with Blackstone and funds affiliated with Rialto Capital to acquire a 20 percent equity stake for $1.2 billion in a venture that holds a $16.8 billion senior commercial mortgage loan portfolio, primarily in the New York metropolitan area.