Koramco Trust Acquires Record-Breaking Coupang Hangdong Logistics Center in REITs

Total Project Cost of 360 Billion KRW
Pre-purchase Before Completion
Expected IRR-Based Return of 8.5%

[Asia Economy Reporter Lim Jeongsu] Koramco Asset Trust has completed the acquisition of the 'TJ Logistics Center' in Hang-dong, Incheon, which Coupang will use as a fresh logistics hub center. The purchase price was 360 billion KRW, marking the largest logistics center acquisition through a REIT (Real Estate Investment Trust) to date.

Koramco Asset Trust announced on the 13th that it acquired the TJ Logistics Center through 'Kokreb No.52 REIT.' This logistics center is a massive cold storage facility located at 95-3, Hang-dong 7-ga, Jung-gu, Incheon, with 7 above-ground floors and a total floor area of 88,230㎡ (26,700 pyeong). It is the largest cold storage facility by floor area within the Incheon South Port logistics complex and was completed in March.

This logistics center is planned to be used by Coupang as a fresh logistics hub center. Kokreb No.52 REIT signed a master lease agreement with Coupang for 5 years, during which early termination is not allowed. The contract period lasts until April 2026. Additionally, the lease term can be extended for another 10 years, ensuring stability in dividends and exit strategies.

Investors in Kokreb No.52 REIT include the Government Employees Pension Service, KT&G, Tobacco & Ginseng Public Officials Pension Service, Samsung Securities, and Hanwha Investment & Securities. The goal is to achieve an internal rate of return (IRR) in the mid-8.5% range over the 5-year management period.

According to the logistics industry, the recent explosive increase in orders for fresh food products such as agricultural, livestock, and marine products, ingredients, and meal kits through online shopping due to COVID-19 has led to a surge in demand for cold storage logistics centers in the metropolitan area.

However, due to the proliferation of small-scale logistics centers, local governments in the southeastern metropolitan area have tightened regulations on logistics center development, limiting the supply of new logistics centers in the metropolitan area. As a result, the Incheon area has attracted attention as an alternative, drawing demand for cold storage logistics centers and major industry investors.

The reason Coupang selected the TJ Logistics Center as its fresh logistics hub center is interpreted as a decision based on transportation conditions. Within a 2 km radius, major highways such as the Metropolitan Area 2nd Ring Expressway, 2nd Gyeongin Expressway, and Gyeongin Expressway are located, enabling fresh food delivery within one hour not only to Seoul's Gangnam area but throughout the metropolitan area.

In terms of scale, it is not only the largest cold storage logistics center in this region but also the largest cold storage facility used by Coupang.

Koramco Asset Trust focused on the shortage of newly constructed large cold storage logistics centers in the western metropolitan area and proactively signed a memorandum of understanding with the seller in May 2019 before construction began, followed by a pre-purchase contract before completion in August last year. Subsequently, a long-term master lease contract was signed with Coupang to establish a stable operational structure.

Kim Cheol-gyu, head of Koramco Asset Trust, said, "This logistics center acquisition is significant in that we secured assets expected to increase in value through prior analysis of trends and supply-demand imbalances raised in some regions," adding, "We will continue to provide new investment opportunities to our clients through investments that are one step ahead of market trends."

Meanwhile, Koramco Asset Trust is the leading private REIT market share company in Korea, managing listed REITs such as iREIT Kokreb and Koramco Energy REIT. Recently, it has increased investment dividend rates by executing various management strategies, including refinancing iREIT Kokreb and selling gas stations of Koramco Energy REIT.