Thursday, August 9, 2018

CPPIB and Caisse Expand Asian Logistics?

Benefits Canada reports, CPPIB invests in Korean logistics facilities:
The Canada Pension Plan Investment Board is partnering with a subsidiary of ESR, a pan-Asian logistics real estate platform, to invest about $653 million in Korean logistics facilities.

Within the investment vehicle, which will focus on building a portfolio of premier facilities in strategic areas, Seoul-based Kendall Square Asset Management will identify new assets for acquisition. In a news release, the CPPIB called South Korea the most connected country in the world and emphasized that such real estate assets are an attractive opportunity as the global embrace of e-commerce widens.

Initially, the venture will invest in a seed portfolio of six facilities, which are already managed by Kendall Square, with an aggregate gross floor area of 270,000 square metres. ESR first established its investment relationship with the CPPIB in 2015.

The move follows several other investments in logistics around the world by the CPPIB, including an acquisition, alongside the Alberta Investment Management Corp., of a U.S. industrial REIT, as well as investments in logistics in Brazil and Hong Kong in recent months.
CPPIB put out a press release, Canada Pension Plan Investment Board and ESR Partner to Invest in Logistics Facilities in Korea:
Canada Pension Plan Investment Board (CPPIB) today announced that it has agreed to partner with ESR and its Seoul based subsidiary Kendall Square Asset Management (“Kendall Square”) to invest up to US$500 million in a newly established investment vehicle targeting modern logistics facilities in Korea. Kendall Square will identify new assets, support the acquisition and provide asset management services to the portfolio.

South Korea’s position as the most connected country in the world, and continuing embrace of e-commerce, provide an attractive opportunity. The portfolio will be comprised of Grade-A facilities in key locations servicing diverse tenant demands.

The vehicle will initially invest in a seed portfolio of six logistics facilities with an aggregate gross floor area of 270,000 sq. m. which are already managed by Kendall Square. The vehicle will target additional investments in core to value added assets to complete the investment commitments.

CPPIB and ESR have a well-established investment relationship, working together in the Korean logistics sector since 2015.
CPPIB and ESR do indeed have a well-established investment relationship as they established a joint venture platform with APG back in 2015 to invest $500 million in Korean logistics properties.

Last week, I went over AIMCo and CPPIB's $1 billion real estate venture investing in US logistics properties through the WPT Industrial Real Estate Investment Trust.

In that comment, I explained how the rise in e-commerce is driving demand for high quality logistics properties not only in the US but across the world.

It's also worth noting that Canada's two largest pension funds, the Caisse and CPPIB, have been very busy investing in Asian logistics properties.

For example, last year, CPPIB and Ivanhoé Cambridge, the Caisse's real estate subsidiary, invested in southeast Asian logistics facilities:
The Canada Pension Plan Investment Board is investing alongside Ivanhoé Cambridge with real estate logistics specialist LOGOS to develop and acquire modern logistics facilities in Singapore and Indonesia.

In Singapore, CPPIB will initially commit S$200 million for an approximate 48 per cent stake in LOGOS Singapore Logistics Venture, which will be seeded by two fully-leased existing multi-storey logistics warehouse facilities as well as one development opportunity.

In Indonesia, CPPIB will initially commit US$100 million in equity for an approximate 48 per cent stake in LOGOS Indonesia Logistics Venture, which has an identified strong pipeline of development opportunities in Greater Jakarta.

“The logistics sector in southeast Asia continues to grow as a result of the burgeoning middle class and the rise of e-commerce, and presents an excellent opportunity for a long-term investor like CPPIB,” said Jimmy Phua, managing director and head of real estate investments for Asia at the CPPIB.

“We are looking forward to making our first direct real estate investments in Singapore and Indonesia through well-established, like-minded partners like LOGOS and Ivanhoé Cambridge.”

CPPIB and Ivanhoé Cambridge will be equal partners in both joint ventures, with LOGOS, as the operating partner, holding the remaining stake in the ventures.

“Ivanhoé Cambridge welcomes CPPIB as our co-investment partner with LOGOS in Singapore and Indonesia,” said Rita-Rose Gagné, president of growth markets at Ivanhoé Cambridge. “Increasing our allocation reaffirms our view of the growth potential in southeast Asia and our confidence in LOGOS as a best-in-class logistics real estate specialist in Asia-Pacific.”
And last October, Ivanhoé Cambridge formed a partnership for investment in Indian logistics facilities:
La Caisse de dépôt et placement du Québec’s real estate arm, Ivanhoé Cambridge, and QuadReal Property Group are investing up to US$800 million in a logistics venture in India.

The venture, a partnership between real estate logistics specialist LOGOS Group and Indian construction company Assetz Property Group, was first announced in August 2017. Focused on developing and owning modern logistics facilities in targeted cities across the country, it has identified opportunities in Ahmedabad, Bangalore, Chennai, Hyderabad, Mumbai, Pune and the national capital region to meet an increasing demand.

Ivanhoé Cambridge, alongside the Canada Pension Plan Investment Board, invested with LOGOS to develop and acquire modern logistics facilities in Singapore and Indonesia in March 2017.

“We are pleased to invest in the logistics space in India, a promising high-growth real estate sector,” said Rita Rose Gagné, president of growth markets at Ivanhoé Cambridge. “India is a strategic market for Ivanhoé Cambridge and we are continuing to grow our presence and our footprint there.”

The venture’s final closing is subject to regulatory approvals.
Rita Rose Gagné, president of growth markets at Ivanhoé Cambridge, has done a great job

She was featured in the Globe and Mail last year offering sound advice to young people, especially young women:
I find that young women work hard, but we have to remind them to ask for the promotion or to ask for the salary increase. I find that I had more opportunities to give that type of feedback to younger women than to young men, who seem to more naturally think about that.

The advice that I'd give to younger people is "no pain, no gain." If you want an extraordinary gain, you have to make an extraordinary effort. You need to absolutely work hard. Then you do have to establish, look for, or develop relationships that are meaningful.
I also like what she said about working around the world: "When you work around the world, you have to be open and non-judgmental. You have to take a step back. Sometimes they will want to talk a lot before getting into a given topic or negotiation, and things might be slower."

Anyway, logistics properties go hand in hand with the rise of e-commerce which is a long-term secular trend. Whether it's in the US, Canada, or Asia, it makes a lot of sense

In order to find and invest in high-quality logistics properties, you need the right partners, especially in India and Asia which are growth markets but have their own set of risks and complexities.

Still, there is no denying that emerging markets are where the growth is going to be in the future and Canadian pensions and other large institutional investors are positioning themselves for this growth through public and private investments

Investing in logistics properties is just another way of playing the rise of consumer demand in Asia. That's the easy part; finding the right partners to invest in logistics properties in the region is a lot more challenging and that's where the hard work takes place.

Below, online retail is growing across the globe. This trend is creating increasing demand for warehouses, resulting in lowering vacancies, higher rents and growing real estate values. And as consumers continue to expect same-day delivery of goods, e-commerce platforms are shifting their logistics strategies to focus on the last mile.

As high-conviction, thematic investors, Blackstone identified this trend early and deployed their capital globally – starting in the United States in 2010, then replicating their platform in Europe, and Asia.

There's a reason why Blackstone is the chosen partner for so many institutional investors. The firm's real estate fund is run by Jon Gray, easily one of the best real estate investors in the world (watch the Bloomberg clip below). Listen to Blackstone's Crown Prince, he's one sharp cookie.


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