Tuesday, May 28, 2019

South Korea Bank Sets Up US Logistics Property Fund

Korea Investment & Securities, a South Korea-based investment bank, has reportedly raised the equivalent of about $68 million in U.S. dollars to set up a new fund to invest in warehouse properties in Washington, D.C., and Philadelphia.

The bank, which raised funds from its own promissory notes sold to investors, eventually plans to list the fund on South Korea's stock exchange, according to local news reports. That move would give other South Korean investors a chance to participate in the hot U.S. industrial property market as well as raise additional investment funds.

Demand for industrial property has shown remarkable strength driven by e-commerce and last-mile logistics as retailers seek further supply-chain efficiencies.

U.S. investment volume climbed to $54.9 billion in the 12 months ending in the first quarter of 2019, with demand for product surging and many new entrants trying to get a foothold in the asset class.

"Sale prices rose 15% year over year on a price-per-square-foot basis and, interestingly, we saw investors shift to secondary U.S. markets to take advantage of lower land and labor costs. Nearly all industrial markets remain supply-constrained and, in spite of added construction, e-commerce and other growth factors will keep industrial vacancy in the single digits over the next 12 months."

News of the Korea Investment & Securities fundraising was reported by multiple South Korean news outlets, which identified their reports as coming from a company announcement.

Korea Investment & Securities officials in Seoul and the United States did not respond to requests for additional information.

"We plan to lead the retail public offering real estate market by sourcing additional public offering real estate funds that provide stable dividends," Sung-Hwan Kim, vice president of Korea Investment & Securities, was quoted as saying.

According to Korean news reports translated using Google Translate, the fund will indirectly invest in two private equity funds with six logistics centers in two major U.S. markets: Washington, D.C., and Philadelphia. It intends to invest alongside Vereit, a U.S. publicly traded real estate investment trust.

Vereit officials declined to comment.

The two private equity funds own logistics centers that are 100% leased by global companies including e-commerce giant Amazon, home improvement retailer Home Depot, food and beverage maker Nestle, delivery services firm FedEx and discount apparel seller T.J. Maxx, according to the reports.

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