CPPIB Reveals Investment in GLP JIF I Japan Logistics Fund

GLP achieved LEED Gold ratings for two of its Nagareyama, Japan projects in 2018

On 4 September the Canada Pension Plan Investment Board (CPPIB) confirmed its participation in the launch of a $2.6 billion Japanese logistics fund announced by GLP late last month, marking the latest cooperation between the pension fund manager and Asia’s largest logistics developer.

CPPIB, which has backed GLP ventures in Japan since 2011, is committing JPY 25 billion ($235 million) to GLP Japan Income Fund (GLP JIF), an open-ended core vehicle which GLP and its partners have already seeded with a portfolio of 11 properties in Greater Tokyo and Osaka.

The Canadian fund manager’s commitment to the income earning vehicle follows a series of earlier development joint ventures with GLP in Japan, and comes as competing warehouse platforms rush to build up their own portfolios in the country.

Moving From Development to Core

“The transactions mark a significant milestone for CPP Investments’ real estate investment programme in Japan,” said CPPIB’s managing director and head of real estate Investment for Asia Jimmy Phua. “The strong fundamentals in the Japanese logistics market continue to make this a compelling investment opportunity for long-term investors.”

Jimmy Phua of CPPIB

The new fund aims to develop and hold institutional quality logistics facilities with six of the seed assets certified as either LEED Gold or Platinum for sustainability and the entire portfolio being fully-leased.

CPPIB characterised its investment in the fund as an extension of its partnership with GLP, which started with a joint venture in 2011 which was subsequently expanded multiple times. The partners then followed up with a second development JV in 2016 and a third in 2018.

The Canadian fund manager exited its initial joint venture with GLP (GLP JDV I) last month and received approximately JPY 48 billion in net proceeds, according to its statement. CPPIB is now funnelling JPY 25 billion of the haul from that development joint venture into the new core fund.

“We are pleased to continue our strategic relationship with GLP, one of our key global real estate partners, while recycling capital for other compelling investment opportunities,” Phua said.

At the time that it launched the GLP JIF fund last month, GLP had indicated that the new vehicle was backed by pension managers, sovereign wealth funds and insurers. Other investors in the core fund have not yet been revealed.

Japanese Logistics Thrives

CPPIB opted to support GLP JIF as Japan’s logistics sector has proved resilient so far this year, despite the pandemic and wobbling economies around the region.

According to CBRE, vacancy rates for logistics properties in Greater Tokyo were below 1 percent during the second quarter, while rents in the Greater Osaka area rose 3.1 percent during the period, compared to the preceding three months.

That demand for warehouse space last month enabled Hong Kong-listed ESR, GLP’s largest competitor in the region, to notch its own victory by leasing an entire 78,119 square metre logistics facility near Tokyo to a division of Daiwa Group nearly a full year before the project is expected to reach completion.

Also in August ESR announced a new JPY 39 billion joint venture with AXA Investment Managers to acquire a logistics facility near Tokyo from one of the Warburg Pincus-backed firm’s own development funds.

CPPIB Continues Warehouse Shopping

In addition to their cooperation on the two earlier development vehicles, in 2018 CPPIB was the largest single investor in GLP’s $5.6 billion Japan Development Partners III — the largest ever private real estate fund focused solely on Japan.

CPPIB, which manages over C$430 billion in assets, has been a prolific investor in Asia’s logistics real estate sector.

In April of this year the Toronto-based organisation teamed up with Dutch pension fund manager APG and ESR in a new $1 billion Korean joint venture, with that vehicle following an earlier $1.15 partnership between the three investors.

Then part of Prologis, GLP began operating in Japan in 2002 and currently manages $19 billion of funds in the country, according to its website.

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