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ESR Group, APG and CPPIB upsize second logistics development fund in Korea

Goola Warden
·2-min read

ESR Group, APP and CPP Investments upsize a second logistics development fund in Korea to US$2 billion

On July 6, ESR Group 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 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% respectively in the JV.

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The JV 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. According to an ESR announcement the JV is a successor vehicle to the US$1.15 billion maiden development joint venture (ESR-KS I). 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.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.

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 Dec 31, 2021. In the 2021 Global Real Estate Sustainability Benchmark (GRESB) Assessment, ESR-KS I was named “Regional Sector Leader” in the Development Benchmark, industrial real estate sector. The fund also received the highest possible 5 Green Stars rating, scoring 93 points and topped five “GRESB Development” rankings. 

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