M&G Real Estate, the real estate fund management arm of M&G Investments, has acquired a logistics facility near Seoul on behalf of its core Asia property investment vehicle for $131 million (KRW 155.5 billion), according to an announcement by the company.
The UK-based fund manager picked up the Yongin Baegam Logistics Centre from Seoul-based logistics specialist LB Asset Management through its Asia Property Fund, according to people familiar with the matter who spoke to Mingtiandi.
The purchase of the 100,000 square metre (one million square foot) warehouse was M&G’s second acquistion of a Korean logistics facility through its open-ended, and also follows sixteen months after the investment vehicle, together with a pair of Korean pension funds, acquired the Centropolis Towers in Seoul for KRW 1.18 trillion in the largest single real estate deal in the country’s history.
The dollar-denominated investment vehicle, which has a gross asset value of $4.4 billion, invests mainly in retail, office and hospitality across Australia, Japan, Singapore, South Korea and Hong Kong.
Targeting a Sought-after Asset
“We are positive about the fundamentals in Asia Pacific’s logistics sector, particularly in Korea, where supply is limited and demand is strong,” said Richard van den Berg, the fund’s manager.
The four-storey Yongin Baegam Logistics Centre, which is in the Yongin logistics cluster approximately 40 kilometres south of Seoul, is tenanted by third-party logistics operators and retailers, and benefits from access to major highways that serve the capital city.
M&G Real Estate said in a statement that the fund has made the acquisition as the industrial real estate sector in South Korea is maturing and attracting more interest from investors, due in part to occupier demand for modern facilities close to the capital city as online shopping grows.
Korean Spending Power on the Rise
“The relentless demand for faster delivery will push third-party logistics companies to larger, more centralised distribution centres near key transport hubs and highway interchanges, such as ours,” van den Berg said.
With transportation accounting for at least half of logistics providers’ costs, the centre’s proximity to Seoul positions it to cater third-party operators aiming to boost their effiicency, according to the veteran fund manager.
M&G Real Estate said that rising demand for logistics assets is in line with the nine percent quarterly uptick in consumer spending seen in Korea during the third quarter of this year.
Logistics Underpinned by Korea’s Growing E-commerce Sector
“The logistics class is a growing market in Korea, driven by the quickly developing e-commerce sector, with local companies like Coupang as well as major developers such as Shinsegae branching out into e-commerce,” said Yeonsook Park, JLL’s advisory manager in Seoul. “The Yongin logistics cluster is the biggest such hub in South Korea, benefiting from being close to both the port and the Seoul metropolitan area.”
Park added that the asset, which was purchased at a price that is in line with market value, is well suited to the demands of most of the players in the e-commerce sector, which are looking for locations that can enable deliveries to Seoul within three or four hours.
Building Up a Portfolio of Sheds
This Seoul deal comes two years after M&G Asia Property Fund made its first Korean logistics acquisition by investing $136 million to acquire the 64,250 square metre Homeplus Hub Logistics Centre in Ansung City.
With this most recent deal in place, 20 percent of the M&G fund’s holdings are now in logistics, while just over a quarter of its investments have been made in the office sector.
Ten months ago, the fund invested S$400 million to forward fund an office building being developed by Surbana Jurong in Singapore’s Jurong Innovation District in a deal that includes the engineering and infrastructure consulting firm agreeing to lease back the 68,915 square metre property on a long-term basis after its scheduled completion in 2021.