KKR Buys Incheon Warehouse Hub From Brookfield for $692M in Korea’s Biggest Logistics Deal

KKR has purchased a South Korean warehouse facility from Brookfield Asset Management for around KRW 1 trillion ($692 million) in the country’s largest ever single asset logistics deal.

In separate releases today the two companies said that KKR, through a fund managed by its local affiliate, Kreate Asset Management, has completed the purchase of the Cheongna Logistics Center in Incheon from Brookfield. Sources familiar with the transaction priced the deal at approximately KRW 1 trillion, confirming local media reports.

With the 4.6 million square foot (427,354 square metre) facility fully leased to tenants including South Korean e-commerce giant Coupang and convenience store chain Emart24, KKR positioned the investment as a bet on the role of logistics real estate in the ongoing transformation of the country’s economy.

“As distribution networks become more complex and modern logistics play a growing role in supporting Korea’s modern economy, we are delighted to invest in Cheongna Logistics Center, a leading logistics facility with sophisticated capabilities in a strategic location,” said David Cheong, head of acquisitions for Asia with KKR’s real estate division. “We look forward to supporting its continued growth by leveraging our global real estate and logistics expertise alongside Kreate’s local capabilities, while further expanding our exposure in the logistics sector and through deepening our collaboration with Kreate.”

KKR is investing in the 10-storey warehouse facility primarily through its Asia real estate strategy, the same fund that the private equity shop put to use in its $3 billion joint deal with PAG to acquire Sapporo Real Estate, with the purchase agreement for that Japanese deal announced last week. 

$236M Gain in Under 3 Years

At the reported compensation, KKR is paying approximately KRW 217.39 per square foot for the 2022-vintage facility, which is located around 40 kilometres (24 miles) west of Seoul at 391-9 Wonchang-dong, Seo-gu. The Cheongna Logistics Center is located within the Incheon Free Economic Zone and in close proximity to both Incheon Port and the city’s international airport.

After acquiring the property for KRW 659 billion through a forward purchase agreement which closed in February 2023, according to a report by Savills, Brookfield had made enhancements including having the property certified LEED Gold under the US Green Building Council’s regimen for sustainable buildings. 

The company also invested in converting some of the distribution hub’s cold chain space for ambient use, as Korea continues to face an oversupply of temperature-controlled warehouses. 

Coupang now occupies the entire ambient portion of the facility and part of the refrigerated space, alongside Emart24. In its statement, Brookfield attributed the quick turnaround on the warehouse investment in part to recovering demand for distribution space in Asia’s fourth-largest economy. 

“We are pleased to have completed the sale of this high-quality logistics asset, which reflects both our disciplined investment approach and the strength of Korea’s logistics market,” said Brookfield head of East Asia real estate Andrew Burych. “There continues to be demand for institutional-grade logistics assets in Korea, especially from global investors who are attracted to the robust fundamentals of the sector and Korea’s economy.”

With Brookfield notching a capital gain of around $236 million less than three years after acquiring the Cheongna Logistics Center, the company has been busy expanding its bets on industrial property in Asia Pacific, including taking on a $588 million New Zealand logistics JV in April.

Then in May the New York-based firm agreed to buy a Singapore portfolio from Mapletree Industrial Trust for $413 million, before purchasing a Hong Kong industrial site from Swire Properties in October for a cold logistics joint venture.

KKR Deal Streak Continues

For KKR, the Cheongna Logistics Center acquisition appears to wrap up a busy year, which includes having already purchased an Incheon-area warehouse in September. In that third quarter deal, which was also managed through its Kreate affiliate, the fund manager agreed to pay KRW 270 billion to purchase the Logisco Hwaseong warehouse from Invesco, with that facility also partially leased to Coupang. 

In February this year, KKR bet on logistics in Australia, setting up a 70:30 partnership with local fund manager Stockland which was initially seeded with three Sydney logistics assets valued at a combined A$388 million ($260 million).

The company has also been among the biggest buyers of commercial assets in Japan this year, having purchased Nissan’s global headquarters in Yokohama for $630 million in November, before teaming up with PAG for the Sapporo Real Estate deal just before Christmas. 

Those deals are in addition to KKR in February completing its successful tender for Japan’s Fuji Soft, which gave it control of the tech firm and its real estate portfolio at a $4 billion valuation. The company has also been working with Singapore’s SingTel to raise $3.8 billion to finance a buyout of data centre operator STT GDC.