M&A deals related to logistics centers on the rise



South Korea’s M&A deals related to distribution centers are on the rise as demand for e-commerce and online grocery delivery grows.

The value of M&A deals related to real estate was around 8.19 trillion won in the first quarter, of which logistics centers-related transactions accounted for about 22 percent, totaling 1.83 trillion won, according to the bell plus compiled based on deals that have completed.

In 2019, M&A deals relating to logistics centers accounted for around nine percent, or 1.77 trillion won, of the total real estate-related transaction value of 19.66 trillion won.

Among five deals that have completed in the first quarter, four were domestic deals and one was an overseas deal. The largest deal in the first quarter was Kohlberg Kravis Roberts (KKR)’s sale of its BLK Pyeongtaek Logistics Center to Korean real estate asset manager Pebblestone Asset Management for 197.6 billion won. BLK Pyeongtaek Logistics Center is a newly developed multi-tenant modern logistics facility located in Pyeongtaek Port, one of the largest ports in South Korea.

Deutsche Asset Management acquired a distribution center in Gimpo, Gyeonggi Province, for 63.9 billion won from KB Real Estate Trust based in Seoul. The deal saw the KB affiliate to realize a profit three years after it purchased the property. The only overseas deal in the first quarter was where Meritz Alternative Investment Management invested 1.5 trillion won in logistics centers located in Europe.

Investment opportunities in domestic logistics centers are expected to rise in the near future. Colliers International’s Jang Hyun-joo expects new investment opportunities both in logistics centers near major cities and large suburban logistics centers further from the city center to grow due to increasing e-commerce demand while investment demand for refrigerated logistics facilities is on the rise.

At the same time, tenants increasingly prefer mega-sized distribution centers, which push investments in logistics centers over 99 thousand square meters.

Geographically, Yongin and Icheon, which traditionally have been main axis for logistics centers, are already saturated with excess supply. As a result, investment and supply in Anseong and Incheon are on the rise. Integration of small and medium-sized logistics facilities are also increasing. Logistics companies have recently focused on integrating outdated small and medium-sized facilities to improve operation efficiency.

In terms of types of investors, blind-pool funds launched by domestic asset management firms have invested in logistics centers. Until recently, investments in logistics centers were led by foreign firms. Among firms, ADF Asset Management has been particularly active in betting on logistics centers over the past two years. ADF Asset Management is managing a real estate-related blind-pool fund as an external manager selected by the National Pension Service and Public Official Benefit Association (POBA). Market insiders expect investments in logistics centers through blind-pool funds to increase further.