Singapore’s sovereign wealth fund GIC has stepped up its exposure in South Korea’s logistics sector by investing in a fund managed by ADF Asset Management.
The vehicle has acquired the newly-built Hyundai Logistics Distribution Centre.
The asset, built at a cost of KRW155.9bn (€117m), was purchased from developer, LogisKoel. The real estate fund is managed by ADF Asset Management, which specialises in South Korea’s logistics sector.
GIC is also partnering Seoul-based ADF Asset Management in developing the Dongtan logistics complex in Gyeonggi Province. To be completed over the next three years, the project will cost KRW800bn.
The Korean logistics market has become the latest investment destination for large institutional investors.
Last November, Canada Pension Plan Investment Board formed a joint venture with Dutch pensions group APG to establish a $500m (€451m) platform to develop logistics assets in Korea, in a joint venture with the Asian group, e-Shang Redwood.
The asset purchased by GIC and ADF is a grade-A dry storage logistics centre in the city of Icheon, a prime industrial and logistics hub with strong transport links to major South Korean cities.
It is fully let to Hyundai Logistics, a third-party logistics and delivery company in Korea.
Loh Wai Keong, managing director and co-head Asia of GIC Real Estate, said: “As a long-term investor, we believe in the potential of Korea’s growing industrial sector.
“This asset is well-located in a key industrial market as part of a comprehensive logistics park, and will generate a stable long-term income stream.”
Kim Chang Hyun, chief executive of ADF Asset Management, said that, with its 15-year master lease with a “credit tenant”, the asset “will set an ideal investment example for both international and Korean real estate investors who are increasingly showing interest in the industrial properties sector”.
Market sources in Seoul credit the e-commerce market and trade expansion under free trade agreements (FTAs) with countries such as Australia for the growing demand for modern logistics facilities and growing investors appetite for logistics.
They also point out that annual returns from logistics centres average about 7%, compared with 5% from office blocks.