Everstone Group, CPPIB set up logistics joint venture IndoSpace Core

Canadian pension fund CPPIB will initially commit $500 million to own a significant stake in the proposed joint venture with Everstone—IndoSpace Core


Sameer Sain, co-founder and managing partner of Everstone Group. Photo: Mint
Sameer Sain, co-founder and managing partner of Everstone Group. Photo: Mint

Mumbai: Canada Pension Plan Investment Board (CPPIB) and Everstone Group’s industrial and logistics real estate development platform, IndoSpace, have formed a joint venture named IndoSpace Core to acquire and develop modern logistics facilities in India, according to a statement on Monday.

The Canadian pension fund will initially commit approximately $500 million and own a significant stake in the proposed joint venture. IndoSpace Capital Asia will manage the new entity.

“IndoSpace Core’s first tranche of $500 million plus the options and appetite to acquire further pipeline assets make this one of the largest commitments not only in the logistics sector but also within the overall real estate space. We will continue to retain full management control of all IndoSpace assets and provide better and higher quality service to all our national tenants,” Sameer Sain, co-founder and managing partner of Everstone Group, told Mint.

He added that the combination of expertise and a strong macro environment, including Make in India, the goods and services tax (GST) rollout and growth in e-commerce, will provide significant opportunities for this joint venture.

Mint was the first to report as early as August last year that Singapore’s Temasek Holdings Pte and GIC Pte, Canada’s CPPIB and the Abu Dhabi Investment Authority are in advanced talks to invest in Everstone Group’s $2 billion real estate investment trust (REIT) offer.

IndoSpace is a joint venture between Everstone Group and US-based Realterm. Everstone is a private equity and real estate firm that focuses on India and South-east Asia, with over $3.3 billion of assets under management.

“In the first tranche, IndoSpace Core will buy ready assets of approx 10 million sq. ft. for about $500 million. Over the next 36-40 months, IndoSpace Core has the option to acquire an additional 15-20 million sq. ft, which will take their overall investment to approximately $1.3 billion,” said a person privy to the matter, speaking on condition of anonymity.

Additionally, the IndoSpace platform, which has so far raised $584 million across two funds to invest in building logistics parks, will raise its third warehousing and logistics fund of about $650 million, in which CPPIB will inject $100 million, this person added.

The first fund—IndoSpace Logistics Park I—was raised in 2009 with a corpus of $240 million. IndoSpace Logistics Park II was raised in 2014 with a corpus of $344 million.

IndoSpace Core has decided to acquire 13 industrial and logistics parks, totalling approximately 14 million sq. ft, from current IndoSpace development funds, the statement said.

The assets are prime industrial properties located in the top industrial and logistics hubs in India, including Chennai, Pune, Mumbai, Delhi and Bengaluru.

“The strong fundamentals underlying the Indian manufacturing and retail sectors and growth in e-commerce, combined with the low stock of high-quality modern industrial real estate in the country, make this a compelling investment opportunity for a long-term investor like CPPIB,” said Andrea Orlandi, managing director and head of real estate investments, Europe, CPPIB.

The Indian industrial and logistics warehousing industry is in its infancy and is growing rapidly, making it attractive for investors. The GST, set to be rolled out. in July and big endorsements for “Make in India” are some of the key reasons for the massive inflow into the country’s logistics space, industry experts said.

The venture also has the option to acquire an existing pipeline worth about $700 million as well as participate in a future development pipeline.

Touted as the biggest taxation reform since Independence, GST will subsume central excise, service tax, value-added tax and other local levies to create a uniform market.

It will bring changes in transportation of goods and will benefit logistics companies as there will be one tax rate across the country. Also, the movement of goods will be easier, resulting in consolidation of logistics systems for companies.

In February last year, IndoSpace said it plans to invest $1 billion in India over the next five years to take its total investment to $1.75 billion, which will increase IndoSpace’s development pipeline from 20 million sq. ft to 50 million sq. ft.

Its tenants include companies such as Amazon, L’Oreal, Procter and Gamble, Nissan, PepsiCo, DHL, Leoni, Steelcase, Kubota, Ericsson, Bosch, Delphi, Caterpillar, Adidas and Asian Paints.

In his last budget speech, Union finance minister Arun Jaitley said, “An effective multi-modal logistics and transport sector will make our economy more competitive. A specific programme for development of multi-modal logistics parks, together with multi-modal transport facilities, will be drawn up and implemented.”

As part of its ambitious multi-modal programme to reduce logistics costs and make the economy competitive, the government proposes the setting up of 35 multi-modal logistics parks at an investment of Rs50,000 crore, the development of 50 economic corridors and an investment template that involves roping in the states and the private sector for setting up special vehicles for implementation.

CPPIB is bullish on India as an investment destination. The Canadian pension fund, which opened its investment office in India in October 2015, recently announced its decision to invest as much as $250 million in Island Star Mall Developers Pvt. Ltd, a unit of Phoenix Mills Ltd. According to real estate consulting firm JLL India, 2017 is likely to see the highest quantum of mall space becoming operational in the country, second to 2011.

As of 31 December 2016, CPPIB had assets worth C$298.1 billion, and has committed about $3.7 billion in India so far.

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