NPS, POBA to set up $314 mn Korean logistics fund

The National Pension Service (NPS) and the Public Officials Benefit Association (POBA) will form a 350 billion won ($314 million) blind-pool fund to invest in South Korea’s logistics sector, the size of which seems big enough to acquire about 10 logistics facilities in the country.

NPS, $570 billion pension scheme, will commit 200 billion won to the first logistics investment vehicle dedicated to South Korea’s logistics sector, and POBA is ponying up 150 billion won, according to sources with knowledge of the matter on Sept. 4.

It was first reported by the Seoul Economic Daily on Sept. 3.

The investment decision committees of both NPS and POBA approved the commitments.

ADF Asset Management Co. Ltd., a South Korean logistics sector-specialized investment firm, will manage the vehicle.

They plan to use financial leverage for half of acquisition costs, the newspaper added.

Considering debt to be borrowed, the fund is expected to raise up to 700 billion won, big enough to buy about 10 logistics centers in South Korea. Logistics warehouses in the Seoul Metropolitan Area recently sold for between 60 billion and 100 billion won, respectively.

Yields from South Korean logistics centers are 7~9% per annum, according to the daily. In comparison, expected rental yields from Seoul office buildings are 4~5%.

Global investors including Blackstone Group, Singapore’s GIC and Temasek Holdings have made their foray into South Korea’s logistics center market over the past few years, in pursuit of steady rental incomes supported by fast-growing online shopping.

In late 2017, Malaysia’s Employees Provident Fund (EPF) acquired a logistics center near Seoul for around 75 billion won ($67 million).

Daepun@hankyung.com