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Straits Trading unit expands logistics footprint with Korea partnership, Aussie buy
STRAITS Real Estate (SRE), a unit of mainboard-listed Straits Trading Co, has entered a partnership in South Korea with real estate investment firm IGIS Asset Management to invest in logistics facilities in Greater Seoul, with an initial capital commitment of KRW110 billion (S$127 million).
Once fully deployed, it is expected that the initial commitment will have a portfolio of up to KRW400 billion, SRE announced on Thursday after the market closed.
After the initial commitment is deployed, SRE will look towards committing additional capital resources "as we believe this opportunity will remain attractive for the near to mid-term", said Desmond Tang, CEO of SRE, in a media release.
The joint venture, comprising SRE, IGIS and three minority shareholders, has thus far acquired a 50 per cent stake in a 62,217 square metre (sq m) freehold site in Incheon, South Korea, for a consideration of KRW32.1 billion. The remainder of the site is owned by an undisclosed offshore investor.
The property was valued at KRW64.7 billion as at May 20, based on an independent valuation. The site will be developed into a 190,000 sq m, five-storey ramp-up logistics facility.
The proposed facility is located near the Incheon International Airport's air cargo terminal and will cater to tenants such as export and import businesses, duty-free operators and global freight forwarders.
IGIS will be responsible for providing development, leasing and asset management services of the site. Construction is expected to commence in July 2019 and be completed by the first quarter of 2021.
Separately, Integrated Logistics Partners (ILP), a joint venture between SRE and property development firm Commercial & General, is set to acquire a land parcel for a build-to-suit project in Adelaide, Australia.
The project sits on a 37,958 sq m freehold site located near Adelaide's central business district, and will be developed into a 14,665 sq m purpose-built office and warehouse facility. The facility will be fully occupied by a New York-listed blue-chip tenant on a long-term lease.
The total development cost for the project will be about A$44.3 million (S$42.2 million). The project is targeted to be completed by Q3 2020.
The project, along with a development in Kilkenny, Adelaide set to be completed in Q4 2019, will extend the weighted average lease expiry (WALE) of the overall portfolio to 8.8 years from 7.3 years currently.
SRE's expansion moves in the logistics investment sector ride on "positive macro trends such as urbanisation growth, an evolving retail landscape, infrastructure spending and competitive sustainability", the company said in the release.
In South Korea, for instance, its partnership with IGIS serves a "pressing gap" in the country's logistics space, said Mr Tang. "(There) are growing occupier requirements for greater logistical agility and efficiency to support their competitiveness, particularly in continually expanding industries such as e-commerce.
"These requirements, together with tenant expansion and consolidation strategies, have rendered most of the current market supply of logistics facilities in South Korea obsolete," he said.
Meanwhile, the planned acquisition in Australia "fits the mould of what we are trying to achieve with the ILP platform by identifying and capitalising on favourable fundamentals while significantly de-risking developments with long-term commitments from blue-chip tenants," Mr Tang added.
Shares of Straits Trading closed at S$2.25 on Thursday, down one cent.