CapitaLand Investment Expands Core-Plus Fund into Korea with $83M Logistics Buy

Singapore-listed CapitaLand Investment (CLI) has acquired a newly built logistics facility near Seoul, South Korea for S$112 million ($82.5 million), making its first buy in Korea and the initial industrial deal on behalf of its flagship regional core-plus fund.

CLI’s addition to its CapitaLand Open End Real Estate Fund (COREF) is the Anseong Seongeun Logistics Centre, a 60,407 square metre (650,216 square foot) warehouse complex located 80 kilometres (49.7 miles) south of the capital in Gyeonggi province, the company announced on Monday. A company representative identified the seller as a Korean asset management company.

The acquisition brings COREF’s funds under management to over S$1 billion and comes just five months after CLI expanded its COREF strategy into Japan with a $105.9 million multi-family acquisition in April. That deal also represented the fund’s first residential investment.

Simon Treacy, CLI’s CEO for private equity real estate, traced this latest move to the growing distribution needs of Korea’s online shopping industry.

“Demand for quality logistics facilities in the country is robust and increasing steadily on the back of accelerating e-commerce growth that has resulted in the country having one of the highest e-commerce penetration rates globally,” Treacy said.

Supply Seen Falling

The Seongeun Logistics Centre, completed in April, sits within an emerging logistics hub in northwestern Gyeonggi province and is linked to major highways which provide connectivity to the capital city and access to key population centres across Greater Seoul. A new expressway opening in 2024 will further boost connectivity in the area according to the press statement.

With the deal marking the second time that CLI has expanded its COREF fund into a new market sector and a new geography this year, Treacy indicated that this latest acquisition allows for further rebalancing of the strategy.

“This investment complements COREF’s existing portfolio of 10 office and multifamily assets across Japan, Singapore and Australia and diversifies the portfolio to the resilient South Korean logistics sector,” Treacy said.

CLI South Korea head Matthew Sohn said the deal gives the fund entry into a top shed hub at an attractive price.

“We see potential in this asset as it has a prime location in the northwestern region of Anseong, an up-and-coming submarket that has attracted major logistics companies to set up base and several global investment firms to invest in logistics assets,” Sohn said.

“We expect logistics supply to moderate significantly in the midterm given rising construction costs, project financing challenges and tighter development restrictions,” he added.

There has been a surge of new warehouse supply in and around Seoul, including Gyeonggi province and Incheon this year. According to JLL data, overall vacancy in Greater Seoul rose to a record 16 percent in the second quarter from under 13 percent in the first three months of the year, while rent growth slowed to 0.2 percent during the same period as tenants gained the upper hand.

Anseong recorded the largest new supply in the southern part of the Seoul capital area with six new centres completed in the second quarter. JLL estimated that developers will roll out a total of 1.37 million pyeong (4.5 million square metres) of new logistics space in Korea during the full year of 2023, although future supply is expected to fall significantly due to severe construction delays.

Beds Then Sheds

The Korean logistics facility adds to COREF’s 10 other assets in APAC comprising four office assets in its home city and Australia, and six multifamily projects in Japan.

CLI’s April acquisition included six Osaka apartment developments with the projects situated near the commercial districts of Umeda and Namba. That rental residential portfolio is expected to offer a total of 428 one-bedroom apartments upon completion, with the company saying at the time that it expects to finish the projects from May 2023 through June 2024.

In March of 2022 the strategy acquired a 30 percent stake in what is now the 29-storey CapitaSky office tower at 79 Robinson Road in downtown Singapore as part of a S$1.26-billion joint buy alongside SGX-listed CapitaLand Integrated Commercial Trust (CICT).

Mitsubishi Backs India Vehicle

CLI’s announcement of its Korean acquisition came just days after the company revealed a new partner in its India efforts.

After announcing last month that it had reached a S$368 million first-close of its CapitaLand India Growth Fund, a CapitaLand representative confirmed to Mingtiandi late last week that Mitsubishi Estates had contributed more than 70 percent of that equity.

The real estate arm of one of Japan’s largest conglomerates chipped in S$263 million of the total cash raised to date for the strategy, which aims to invest in grade A business parks in Chennai, Bangalore, Hyderabad and Pune, India.

The investment gives Mitsubishi Estates a 50 percent stake in the fund, which aims to raise S$525 million, according to CapitaLand Investment’s earlier statement.