Securities Firms Successfully Raise PF Funds for Logistics Centers One After Another

Growth in Mobile Commerce Drives Increased Investment Demand
Led by Namcheongra Complex Logistics and Icheon Ambient Logistics
Emerging as an Investment Alternative Post-COVID-19

[Asia Economy Reporter Lim Jeong-su] Securities firms are consecutively leading project financing (PF) deals for logistics facilities, successfully securing funding. This is interpreted as an increase in logistics facility demand from distribution companies due to the rapid growth of the mobile commerce market amid the COVID-19 pandemic, leading to increased related investments.

According to the investment banking (IB) industry on the 24th, Hana Financial Investment recently led a PF deal worth 195 billion KRW arranged by the CMS Consortium. The funds will be used to develop the Namcheongra Smart Logistics Complex in the Wonnchang-dong area of Seo-gu, Incheon Metropolitan City. The PF was structured into senior tranche of 145 billion KRW, mezzanine tranche of 30 billion KRW, and junior tranche of 20 billion KRW according to repayment and collateral priority, successfully attracting investors.

Seongdo ENG, specialized in high-tech factory construction, was in charge of construction. The project is under a completion guarantee condition, meaning if construction approval is not obtained within 20 months from the PF loan date, the borrower bears the repayment burden. Hana Financial Investment raised loan funds by issuing short-term bonds backed by the PF principal and interest repayment funds as underlying assets. In this process, a liquidity commitment agreement was also provided to cover any shortfall in short-term bond repayment funds.

KB Securities and Eugene Investment & Securities led a PF deal worth 67 billion KRW for Donghan ENG to build a room-temperature logistics center. The raised funds will be used for constructing the room-temperature logistics center in Seolseong-myeon, Icheon-si, Gyeonggi-do. Seyoung Construction and Haesung Engineering are responsible for construction. The construction companies have a completion guarantee obligation to obtain usage approval within 16 months.

SK invested 50 billion KRW in the first half of this year in a domestic ultra-low temperature complex logistics center (cold chain) together with global IB Goldman Sachs. The cold chain is a logistics facility that stores and transports fresh foods such as agricultural and livestock products at low temperatures to maintain freshness and quality. Korea Investment & Securities is also reportedly leading a cold chain PF and currently recruiting investors.

Investment in logistics centers has accelerated with the activation of the mobile commerce market. Recently, large-scale PFs such as apartment complexes have decreased due to real estate regulations, making logistics centers relatively safe and profitable assets. An IB industry official said, "Although overall PF and alternative investment volumes have decreased after COVID-19, PF related to logistics facilities continues to increase," adding, "In the ultra-low interest rate era, logistics centers and data centers are gaining attention as investment alternatives."