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Alternative investments

Shinhan REITs poised to buy Amazon logistics center

Likely to take over $93 mn equity tranche from IGIS Asset Management

By Jun 04, 2021 (Gmt+09:00)

Bird's-eye view of the fulfillment center west of Albuquerque in New Mexico
Bird's-eye view of the fulfillment center west of Albuquerque in New Mexico

South Korea's Shinhan REITs Management Co. is poised to invest $93 million to buy a pre-completed fulfillment center in New Mexico, under a long-term agreement with online retail giant Amazon.

The investment, set to become Shinhan REITs' first overseas deal, is aimed at beefing up the real estate investment trust manager's portfolio before it seeks a domestic stock market listing later next year.

Shinhan REITs has been chosen as the preferred buyer of the equity interest in the fulfillment center, up for sale by Seoul-based IGIS Asset Management Co., according to company and banking industry sources on June 3.

At the end of last year, IGIS had formed a consortium with Shinhan's parent group, Shinhan Financial Group, to acquire the facility for $281 million. IGIS injected $93 million to acquire the equity tranche, and Shinhan Financial Group provided $188 million in a senior loan to finance the transaction.

Amazon has already entered a long-term agreement to occupy the fulfillment center, its first logistics facility in the state of New Mexico, for at least 20 years to up to 45 years. The US retailer will take charge of all operating expenses during the contract period.

"We will enjoy stable rental incomes from Amazon and further boost returns from the investment because it won't incur additional costs during our investment period," a Shinhan REITs official told Market Insight, the capital news arm of The Korea Economic Daily. 

"Going forward, Shinhan Financial Group will build friendly relationships with Amazon and expand relevant investments."

The lease agreement marked the first of such kind directly signed between a Korean company and Amazon, according to the sources.

The front view of the fulfillment center in New Mexico
The front view of the fulfillment center in New Mexico

The fulfillment center, west of Albuquerque, New Mexico's largest city, is set to be completed in August of this year. It is within a 10-minute drive of downtown Albuquerque.

It boasts state-of-the-art robotic systems, enabling 45 logistic vehicles to load or unload parcels at the same time. In its vicinity are other logistics and distribution centers run by FedEX, Shamrock Foods and Tempur, a mattress manufacturer, as well as truck rest areas and repair service centers.

Shinhan REITs is planning to set up a logistics REIT within the year, backed by assets owned by LogisValley, a South Korean logistics service provider. Adding the Amazon-leased US facility to its portfolio, the new REIT will go public on the Korea Exchange in the second half of 2022 at its earliest. 

Write to A-young Yoon at youngmoney@hankyung.com

Yeonhee Kim edited this article.

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