[Asia Economy Reporter Lim Jeong-su] Since the COVID-19 pandemic, project financing (PF) and investments related to logistics facilities in the financial investment industry have been ongoing. The increase in online shopping has led to a rise in demand for logistics facilities near major cities, resulting in increased related investments.
According to the investment banking (IB) industry on the 11th, Top Logipro Co., Ltd., which develops logistics complexes, recently raised 220 billion KRW in project financing (PF) for the development of the Wanchang Cold Logistics Center in Wanchang-dong, Seo-gu, Incheon. Meritz Securities, IBK Investment & Securities, and DB Financial Investment participated as lead managers. The PF was executed in tranches according to repayment priority: senior tranche of 165 billion KRW, mezzanine tranche of 30 billion KRW, and junior tranche of 14 billion KRW. The loan maturity is about 2 years and 7 months, with interest rates differentiated according to repayment priority.
During the funding process, Samwoo CM Architects Co., Ltd., Dongsung Heavy Industries Co., Ltd., and Seyoung Construction Co., Ltd., which are responsible for constructing the logistics center, agreed to bear the obligation of guaranteed completion. Construction must be completed and usage approval obtained within 25 months. If completion approval is not obtained within the deadline, these companies must repay the PF debt on behalf of the project operator.
Funding was also secured for the smart logistics complex to be built on the former Kyungbang Yongin factory site in Pogok-eup, Yongin, Gyeonggi Province. Dingdong Co., Ltd., the developer of the Pogok Smart Logistics Complex, recently raised 230 billion KRW from a lending consortium for the logistics center development project. Eugene Investment & Securities is known to be part of the PF lending consortium. The loan was executed in tranches according to repayment priority: senior tranche of 200 billion KRW, mezzanine tranche of 20 billion KRW, and junior tranche of 10 billion KRW.
This project is being conducted through a managed land trust method by Korea Asset Trust. Dongwon Construction Industry is responsible for construction and bears the obligation of guaranteed completion, agreeing to obtain usage approval within 18 months. Failure to comply requires assuming all debt.
Asset management companies are also actively investing in logistics complexes. KR Asset Management established a private fund, "KR Specialized Private Real Estate Investment Trust No.16," in November last year and acquired the Yeoju Daeshin Logistics Center located in Daeshin-myeon, Yeoju, Gyeonggi Province. KR Asset Management invested funds raised through a 60 billion KRW loan arranged by Eugene Investment & Securities and by issuing fund beneficiary certificates to institutional investors.
Baro Asset Management, an asset management company affiliated with the Shinhan Group, formed a private fund "Baro Specialized Private Fund No.21" and purchased the Yuhan-Kimberly logistics center for 21.6 billion KRW. This logistics center is a room-temperature warehouse with a total floor area of 15,449㎡ (approximately 4,673 pyeong), consisting of one basement floor and one above-ground floor, located in the 2nd Industrial Complex in Gimcheon, Gyeongbuk. It was completed in August last year. A long-term master lease contract was signed with Yuhan-Kimberly, and rent will be received for eight years.
An IB industry official said, "Despite difficulties in on-site due diligence due to the COVID-19 pandemic, domestic institutional investors' overseas alternative investments have not decreased but are rather increasing," adding, "Funds are particularly flowing into domestic and overseas logistics facilities." An investment institution official forecasted, "With the possibility of global logistics companies like Amazon entering the Korean market emerging, the preference for investing in logistics facilities near major cities is expected to continue for some time."
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