ESR Korean REIT Buys Greater Seoul Logistics Hub for $94M

Not yet six months old, ESR Kendall Square REIT has added its second warehouse in the past week, as Korea’s first publicly listed logistics trust continues to build its portfolio.

The KRX-listed trust announced late Thursday that it had completed the acquisition of the Yongin BRIC facility in South Korea’s Yongin logistics hub for $94.2 million as the 12th asset under its management.

“We are proud to show our investors that the REIT’s investment team provides excellent execution capacity in sourcing market-proven assets like Yongin BRIC with competitive pricing,” said Sanghwoi Bae, chief executive of the trust’s manager. “The management of ESR Kendall Square REIT is committed to providing growth and profitability through continuously identifying and sourcing prime logistics real estate assets like Yongin BRIC for investors.”

The addition of the 43,045 square metre (463,333 square foot) facility in the city of Yongin, which is around 90 minutes’ drive southeast of Seoul, follows last week’s news that the REIT had closed on the $145 million purchase of Anseong Logistics Park. No seller was disclosed for either asset.

Key Distribution Hub

Fully leased by multiple tenants, Yongin BRIC is part of a logistics cluster in the largest city in Gyeonggi province where the REIT already has a pair of assets, Yongin Logistics Park 1 and Yongin Logistics Park 2.

Yongin is a primary shipping hub in Korea, with Singapore’s Mapletree Logistics Trust and the UK’s M&G Real Estate among the major investors holding distribution centres in the city.

The four-storey Yongin BRIC has two basement levels and can handle both dry and cold storage, according to a press release issued Thursday by the trust’s sponsor, Hong Kong-based developer and fund manager ESR.

The inclusion of the newly built Yongin BRIC boosts ESR Kendall Square REIT’s GFA by 6 percent to a total of 727,140 square metres across 12 logistics assets valued at $1.3 billion.

Pioneering Logistics REIT

This latest acquisition comes less than a half-year after shares began trading in ESR Kendall Square REIT as South Korea’s first listed trust focused on the warehouse sector. Spun off from ESR’s Korean unit, ESR Kendall Square, the trust’s IPO raised $650 million.

While South Korea’s markets are notorious for being dominated by domestic players, ESR Kendall Square REIT’s institutional investors include global names like ESR, BlackRock and the Canada Pension Plan Investment Board (CPPIB), which holds nearly a quarter of the trust’s units.

ESR Kendall Square REIT’s first acquisition this month — Anseong Logistics Park — had been included as a committed dropdown asset in the initial IPO plan.

The 94,875 square metre warehouse in Seoul’s southern suburbs is 100 percent master-leased by South Korea’s largest e-commerce company, Coupang, with a 4.5-year weighted average lease expiry.

Powered by E-Commerce

ESR Kendall Square REIT’s expansion comes as South Korea’s booming online shopping sector continues to fuel demand for international-quality logistics facilities.

The country’s e-commerce market grew by nearly 20 percent in 2020 to rank fifth in the world, according to data from market research firm eMarketer. Domestic e-commerce sales in the North Asian nation reached $104.1 billion last year, the report said.

In April, ESR and CPPIB announced that they would expand their Korea Income Joint Venture, effectively doubling the size of the logistics vehicle to $1 billion in total equity allocation. The two partners said they would collectively increase their investment by a further $500 million in the Korea Income JV, which had contributed six assets to ESR Kendall Square REIT’s initial portfolio.

Other global players in the market include Singapore’s Mapletree Logistics Trust, which in February said it would acquire five warehouse assets in South Korea for $250 million, and US developer Hines, which in May announced plans to build a five-storey, 42,735 square metre cold-chain facility in Greater Seoul’s Hwaseong city.