A consortium of Kohlberg Kravis Roberts (KKR) and its Seoul-based real estate investment arm Kreate Asset Management has been picked as the preferred buyer of Brookfield Cheongna Logistics Center in what is expected to mark the largest logistics transaction in the country, according to investment banking sources on Monday.
The potential deal, valued at around 1 trillion won ($720 million), signals a rebound in the domestic logistics industry amid a dearth of new supply in the Seoul Metropolitan Area.
Brookfield has struggled to offload the logistics facility it acquired for 659.0 billion won in 2023 as its high price has deterred buyers, with warehouse oversupply weighing on the market.
In a July auction, Brookfield Cheongna Logistics Center drew three bidders: the KKR-led consortium, IGIS Asset Management Co. and Pacific Asset Management Co..
Their bids came in far below its asking price of about 1 trillion won.
While entering into talks with the bidders, Brookfield had also considered refinancing the asset to hedge against a collapse of the deal, said the sources.
However, the Canadian asset manager decided to proceed with the deal after reaching an agreement with the KKR-led group on the price, which the real estate sector is estimated to top 900 billion won.
Including other expenses, the transaction is estimated to reach 1 trillion won, marking the largest-ever deal in the domestic logistics sector.
Brookfield aims to close the deal within the year.
LEASED TO COUPANG, EMART24
Brookfield Cheongna Logistics Center in Wonchangdong, Incheon, about 40 km west of Seoul, is the single largest logistics center in South Korea. It comprises 10 floors above ground and one below, spanning a gross floor area of 430,000 square meters.
Coupang Inc., the country’s top e-commerce platform, occupies the entire ambient-temperature warehouse and part of the cold-storage facility. Emart24, a convenient store chain, leases another section of the cold-storage space.
This year, Brookfield kicked off the sale process ahead of the maturity of debts tied to the logistics center.
If the divestment goes through, Brookfield is expected to pocket about 300 billion won in gains from the property it had acquired from KPLogistic PFV, a Korean real estate developer.
The potential deal has been closely watched as a gauge of a recovery in the Seoul metropolitan logistics market.
“It’s a mega deal taking place despite tight liquidity in the investment industry,” said a domestic real estate investment company official. It reflects confidence in the logistics sector.”
LACK OF NEW CONSTRUCTION
A slowdown in new warehouse construction has eased concerns about supply glut.
According to commercial real estate service company JLL, the number of permits for new logistics center construction with a total floor space of 33,000 square meters or more in the Seoul Metropolitan Areas dropped to just five in the first half of this year.
That compared with 83 in 2023 and 33 in 2024.
A surge in construction costs has stalled new projects. Tight project financing has delayed cancelled some developments that have already secured permits.
In the early 2000s, KKR booked eye-popping gains from the deal of Oriental Brewery Co., South Korea’s leading beer brand ans has since expanded into the country’s real estate market.
In 2024, the New York-based investment firm established Kreate Asset Management, a Seoul-based real estate investment company, with ex-IGIS Asset Management employees in 2024.
By Gyeong-Jin Min
min@hankyung.com
Yeonhee Kim edited this article.
