This week in asset owner history: CPPIB eyes Southeast Asia logistics assets
Asia's growing spending power, smartphone use and penchant for e-commerce have been like rocket fuel for some industries like logistics and will continue to be so for the foreseeable future, giving associated real estate a big leg-up.
That was the view of Jimmy Phua, head of real estate investments for Canada Pension Plan Investment Board (CPPIB) in January 2019.
In the hunt for modern warehouses and distribution centres to develop and rent out to logistics operators the fund has increasingly been looking to Southeast Asia, he said.
“In the past few years, we have been spending more time [looking at logistics investments] in Southeast Asia, including Singapore, Malaysia and Indonesia,” he said.
Phua noted that while investing in the sector has been fashionable for some time now, it continues to merit considerable investor attention because of the region's attractive demographics and the logistics-related infrastructure still sorely needed in many of its markets.
INDIA ECOMMERCE
CPPIB, along with other Canada-based asset owners and managers, has been seeing great potential in Asia real estate assets.
Logistics is an ongoing favourite asset type, as the emergence of e-commerce requires new and more modern warehousing. Building such assets in both Asia’s developed and developing markets have the potential to give long-term returns with relatively low risk within private market real assets.
For CPPIB, the logistics potential also includes India. Seeking to tap into the future shopping needs of India's rapidly urbanising and suburbanising population, which is on course to become among the world’s largest, its growing strategic bet was on online retail and involves both real estate and equity.
“The organised retail sector and ecommerce in India show significant potential for growth over the longer term,” Suyi Kim, then head of Asia Pacific at CPPIB, told AsianInvestor in October 2019.
“We continue to look at opportunities across the broad definition of ecommerce-related sectors, as well as more traditional real estate investments in high-quality retail and mixed-use developments,” she said.
In terms of logistics assets, CPPIB formed a joint venture with local logistics specialist IndoSpace in May 2017, known as IndoSpace Core, to focus on acquiring and developing modern logistics facilities in India.
ALL OVER
Among other logistics investments in Asia, CPPIB also has $412 million allocated to the GLP Japan Income Fund which focuses on private open-ended logistics real estate.
In China, CPPIB has linked up with logistics specialist manager Goodman to invest in developing and owning modern warehousing assets to cater China’s emerging economy, and the ecommerce sector in particular.
The interest in logistics, warehousing and associated infrastructure continues even today.
Another big element of the logistics megatrend of ecommerce is the storage of the vast amount of accumulated data.
In March 2022, CPPIB and Pacific Asset Management Company (Pacific) announced a $170 million joint venture to develop the largest carrier-neutral hyperscale data centre in South Korea.
CPP Investments and a fund managed by Pacific will commit $116.4 million in equity for the project development of the Jukjeon Data Centre, with CPP Investments allocating $107 million.