Credit Suisse-led fund buys Korean logistics centers for $104 mn

A fund led by Credit Suisse Asset Management’s real estate investment arm has acquired two logistics centers in South Korea for 120 billion won ($104 million), which marked the European firm’s first investment in the country’s commercial property market.

The logistics facilities located in Icheon, southeast and one-hour drive from Seoul, were put up for auction by GIC in February, along with six other logistics centers owned by the Singapore’s sovereign wealth fund in South Korea, according to Credit Suisse on June 30.

In the auction, GIC sold two of the eight facilities to the Credit Suisse-led fund and another two to South Korean asset managers specializing in logistics centers -- ADF Asset Management Co. Ltd. and Kendall Square Asset Management Inc.

But it withdrew from the sale process for the other four facilities for an unknown reason and decided to continue to hold them.

Credit Suisse participated in the auction via a fund of Seoul-based Pebblestone Asset Management Co. Ltd.

It funded most of the acquisition as a limited partner. The exact amount of its investment has yet to be disclosed.

“Logistics centers in South Korea deliver higher ROI than those in Europe,” a Credit Suisse source told the Korean Investors. “We expect their value will rise, driven by continuous growth in the logistics market on the back of active e-commerce transactions.”

The two logistics centers acquired by the Credit Suisse-led fund are fully leased and seen as core assets among the eight facilities up for sale. They have a floor space of 36,396 square meters and 49,868 square meters, respectively.

FIRST-GENERATION INVESTORS

GIC is believed to pocket handsome profits from the sale.

It is the first-generation foreign investor in South Korea’s logistics sector, along with Temasek Holdings.

The two Singaporean entities had spent more than $1 billion in snapping up logistics centers near Seoul since the early 2000s for expected annual returns of 8-9%. They even acquired uncompleted facilities owned by companies in financial distress.

Their move contrasted with South Korean pension funds and institutional investors who shunned the high-risk, high-return assets at the time.

Global investment firms Blackstone and KKR and Malaysia’s Employees Provident Fund (EPF) have recently made their foray into South Korea’s logistics market.

The US-based investment firm Invesco has decided to put 208 billion won ($186 million) into a modern logistics center development near Seoul earlier this year.

hiuneal@hankyung.com