A KKR-led consortium is selling a newly developed logistics facility near Seoul, according to an announcement today by the company, as the rise of South Korea’s e-commerce sector helps drive investor demand for warehouse assets.
The US private equity giant is disposing of the 136,500 square metre (1.5 million square foot) BLK Pyeongtaek Logistics Center for an undisclosed sum to Seoul-based Pebblestone Asset Management, which is making the purchase on behalf of Korean institutional investors.
“The rapid growth of e-commerce is transforming South Korea’s logistics sector, creating a growing demand for fully-integrated and technology-enabled warehousing facilities that can support greater volumes and faster delivery,” said KKR’s head of Asia Pacific real estate, John Pattar.
Acquiring a High-Spec Shed
“BLK Pyeongtaek Logistics Center is a one-of-a kind facility strategically located in a fast-growing coastal city with easy access to major transportation routes,” said Pebblestone Asset Management’s CEO and managing partner, Terry Hwang.
Located in Pyeongtaek Port in the southernmost part of Gyeonggi province, the five-storey facility is roughly 70 kilometres south of Seoul and one of the largest advanced logistics centres in the area.
Developed by KKR in partnership with the Korean unit of Japanese fourth-party logistics provider Bear Logi, which is headed by former Redwood Group managing director Matthew Zann, the project includes cold and dry warehousing facilities, making it suitable for companies across a range of industries, according to the joint announcement by KKR and Pebblestone Asset Management.
Yeonsook Park, a manager with the advisory division of JLL in Seoul noted that BLK Pyeongtaek Logistics Center’s location, which makes it possible to make round trip deliveries to Seoul more than once a day, would make it particularly attractive to tenants. Occupiers of the warehouse facility, are said to already include a major e-commerce company, with Park noting that local online retailers active in the area include 11st, Coupang, and Gmarket.
According to JLL, market rents for the Pyeongtaek area are currently KRW 25,000 per pyeong ($6.4 per square metre) per month, while Savills said in a recent report on the country’s logistics sector that average cap rates stood in the high five percent area last year.
KKR Divesting from Asia II Fund
KKR, which has over $8 billion in real estate assets under management globally, is selling the logistics asset after making the investment in 2017 on behalf of its Asia Fund II, the firm’s second pan-Asia fund, which closed on $6 billion in equity seven years ago.
As the largest ever Asia-focused investment fund at that time, the pooled investment vehicle received commitments from institutional investors including $500 million from CalPERS.
KKR and Pebblestone Asset Management had not replied to enquiries from Mingtiandi at the time of publication.
Doubling Transaction Volumes
KKR’s sale comes as logistics assets in South Korea have become more popular among investors amid growing demand for distribution facilities from online shopping platforms.
Transactions involving Korean logistics assets reached KRW 1.4 trillion ($1.2 billion) over the first three quarters of last year — double 2018’s performance for the same period — according to Savills’ most recent report on the country’s warehousing sector.
The property services firm said that foreign investors were responsible for approximately 70 percent of that volume.
Among those international buyers was the UK’s M&G Real Estate, the real estate fund management arm of M&G Investments, which just over two months ago spent $131 million to acquire a 100,000 square metre logistics facility near Seoul on behalf of its core Asia property investment vehicle.
During June of 2019, CBRE Global Investors made one of Korea’s largest logistics transactions of 2019 when it acquired the 239,000 square metre Logis Valley Ansan property from local developer Sunkyung E&C for KRW 3.74 billion, according to Savills.