Mapletree Logistics Trust Management Ltd., announced the proposed acquisition of a logistics property in South Korea, Wonjin Logistics Centre, from Wonjin Logistics Co., Ltd. for KRW37.85 billion.
The Property comprises two blocks of multi-tenanted dry warehouses with a total gross floor area of about 29,325 square metres and land area of 31,055 sqm. It is located in Gyeonggi-do, a province surrounding Seoul with 25 million inhabitants or over half of the country’s population, and also the largest logistics cluster in South Korea. Gyeonggi-do is popular with thirdparty logistics service providers (“3PLs”) and distributors due to its proximity to Seoul and easy accessibility. The Property is within a one-hour drive from Seoul and is well-connected to the other parts of South Korea via major highways such as Yeongdong expressway and National Route 17.
Developed over two phases (Block A and Block B) in 2007 and 2018, the Property has floor-toceiling height of 9.5 metres and floor loading capacity of up to 3 tonne/sqm. Block A, with a GFA of about 21,065 sqm, is designed with cross-docks, a relatively rare feature for warehouses in Korea which enables users to achieve greater efficiency in managing warehousing and logistics operations.
Block B, with 8,260 sqm of GFA, is designed with enhanced features such as direct ramp access to all floors as well as dual-layer walls to minimize dew condensation.
The Property has been valued at KRW40.90 billion by CBRE Korea as at 30 October 2018 based on the direct capitalisation approach, discounted cash flow analysis, direct comparison approach and depreciated replacement cost approach.
Rationale for the Acquisition
South Korea is a growing logistics market underpinned by favourable fundamentals. Rising ecommerce growth and a growing third-party logistics market continue to drive demand for modern warehouse space in locations nearby Seoul. The country is also the fourth largest 3PL market in Asia Pacific and is growing at an annual rate of 7.8%.
The Property is fully leased to three established 3PLs with a weighted average lease expiry of 4.3 years (by net lettable area). Wonjin Logistics, which will leaseback over 60% of the Property’s GFA, is a prominent local 3PL and its major customers include well-known corporations such as Lotte, Amore Pacific and Carrier. The remaining space is leased to one of the largest logistics companies in South Korea as well as a fast growing 3PL in Asia, especially in the fashion industry.
The Acquisition, with an initial net property income yield of approximately 6.5% based on the purchase price of KRW37.85 billion, is expected to be accretive to MLT’s distribution.
Funding
MLT is expected to incur an estimated total transaction cost of approximately KRW2.4 billion (~S$2.9 million) which includes stamp duty, professional advisory fees and the acquisition fee payable to the Manager of approximately KRW378.5 million (~S$0.5 million), being 1% of the purchase consideration of KRW37.85 billion.
The Acquisition will be funded by debt and is expected to be completed by 4Q FY18/19, subject to satisfaction of relevant conditions precedent and completion of regulatory filings. Upon completion, MLT’s aggregate leverage ratio will be approximately 39.2%, while MLT’s total portfolio will comprise 141 properties with a book value of approximately $7.8 billion.
