Korea’s leading state-owned investors, the National Pension Service (NPS) and the Korea Investment Corporation (KIC), have forged their first ever co-investment, piling a total of US$600 milllion into a US$2 billion North America logistics real estate fund managed by GLP Capital Partners. The fund is targeting an annual internal rate of return of more than 10%.
The investors are looking to capitalize on the rapid growth in logistics in the wake of the pandemic, which stimulated the e-commerce market and raised demand for big-box storage and distribution warehouses. SOIs are pivoting towards logistics and away from offices in anticipation of a potential permanent change in working culture. A lack of supply in the market and robust demand growth are leading to increasing rental rates, fuelling investment in logistics real estate.
NPS has already developed exposure to the North American logistics market. In December, its 50:50 joint venture with Stockbridge acquired a logistics portfolio of 23 Class A logistics assets, with significant representation of e-commerce tenants on long-term leases.
The PPF’s investment in logistics real estate comes as it seeks to raise investments in alternative assets from 10.8% at end-March to 13.5% by end-2022, deploying US$30.5 billion of dry powder in less than two years. At the same time, it is pulling the plug on its coal-related investments, including mining and power plants, in a bid to address climate change and adapt to tougher environmental regulations.
Meanwhile, KIC is aiming at alternatives asset allocation of 20% of AUM by 2024 and 25% of AUM by 2027, up from 15.4% at end-2020. These include forming joint ventures with other state-owned investors, co-investments with general partners, or direct investments. However, in January CIO David Park said, "We will increase our allocation to infrastructure assets and cut investments in real estate.”