Deutsche Bank’s asset management arm has bought a recently completed logistics warehouse in Icheon City, south of Seoul for 61.2 billion won ($57.4 million), as global real estate investors pile into Korea’s modernising logistics sector.
DWS (formerly Deutsche Asset Management) bought the property, Logiport Icheon, from LaSalle Investment Management, which completed the four-storey, 45,000 square metre warehouse as its first project in the country last year. DWS made the acquisition on behalf of one its European funds in an off-market transaction, the firm announced this week.
DWS has about 700 billion euros ($861 billion) of assets under management globally, including $59.3 billion of real estate assets, and has previously picked up two other logistics facilities in Korea through off-market deals.
A representative of LaSalle IM said the firm was unable to comment, citing confidentiality.
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“Institutional investment in Korean logistics is just starting to take off,” commented Johnathan Noone, a senior manager at property consultancy Cushman & Wakefield Korea in an exchange with Mingtiandi. “There’s a real dearth of quality assets – the type our foreign clients are interested in – available on the leasing market so I think these investors have spotted that gap and are trying to fill it. Up until now most of the quality facilities have been built to suit projects.”
Logiport Icheon is located in a satellite city of Seoul about 50 kilometres southeast of the nation’s capital. Icheon is part of Gyeonggi-do, the province ringing Seoul, where yields for quality logistics facilities hover at around 6.5 to 7.0 percent, according to Noone.
These satellite cities, which also include Incheon and the provincial capital of Suwon, “provide good access to the end customers in Seoul but land/rental prices are much lower than in Seoul itself,” he said.
“Boosted by the growth of e-commerce in the region, a healthy leasing market, location and tenancy mix makes Logiport Icheon an attractive addition to our fund,” commented Victoria Sharpe, head of alternatives for Asia Pacific at DWS in a statement. “This is our third logistics acquisition in Seoul, we will continue to seek quality investment opportunities, such as Logiport Icheon, in the region.”
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LaSalle IM acquired the site for Logiport Icheon in early 2016 and announced the completion of the grade A property last December. The US-based real estate investment firm signed up a diversified mix of tenants, including the exclusive logistics operator for Mercedes Benz in Asia; Li & Fung, which services Nike and Converse; and two other local third-party logistics firms.
LaSalle IM built the property for its LaSalle Asia Opportunity Fund IV (LAOF IV), the fourth in the firm’s series of closed-end, opportunistic vehicles focussed on the region. The $485 million fund aims to build a property portfolio across several Asian markets, including logistics investments in Singapore, China, Japan and Korea.
Korea’s e-commerce market is the region’s third-largest and the world’s seventh-largest in terms of sales, Mark Gabbay, CEO of Asia Pacific for LaSalle IM noted to Mingtiandi in December. The country also has the highest penetration rate for online shopping in Asia Pacific at 72 percent of the population (as of year-end 2016).
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In recent years, global real estate investment heavyweights have poured hundreds of millions of dollars into Korea’s logistics sector as online shopping swells and control of the nation’s supply chain shifts from conglomerates to third-party logistics providers.
Los Angeles-based CBRE Global Investors, which has over $100 billion in assets under management worldwide, announced the final closing of a $1 billion warehouse-focussed Asia real estate fund last November that will create core logistics assets in Korea as well as China and Japan.
US private equity firm Blackstone is reported to have committed around $200 million to a fund to finance its purchases of warehouses in Korea, including two logistics assets near Seoul that it scooped up in partnership with Korea’s Mirae Asset Global Investments for $59 million in 2016.
In the same year, Singaporean sovereign wealth fund GIC backed a real estate fund that acquired the Hyundai Logistics Distribution Center in Icheon from its developer for $130 million. Dutch pension asset manager APG Asset Management and Canada Pension Plan Investment Board (CPPIB) also entered the fray in 2015, setting up a $500 million joint venture with Shanghai-based warehouse builder e-Shang — now e-Shang Redwoood (ESR) — to develop logistics properties across Korea.