Straits Trading enters South Korea logistics facility JV and plans Australia expansion

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The Straits Trading Co.’s subsidiary Straits Real Estate (SRE) entered a strategic partnership with IGIS Asset Management to create a portfolio of modern logistics facilities around the Greater Seoul area, with an initial capital commitment of 110 billion won, or around S$127 million, the company said Thursday.

The South Korea joint venture made its first investment of 64.2 billion won, or around S$74.7 million, for a 50 percent interest in a 62,217 square meter freehold site in Incheon, South Korea, to be developed into a five-storey ramp-up logistics facility, Straits Trading said in a filing to SGX.

The remaining 50 percent of the development is held by “a reputable offshore investor,” the filing said.

IGIS will provide development, leasing and asset management services for the proposed facility, which is located near Incheon International Airport’s air cargo terminal, the filing said. Construction is due to begin in July, with completion expected by the first quarter of 2021, Straits Trading said.

“Our expansion into South Korea’s logistics sector comes amidst a rapidly evolving logistics landscape, where there are growing occupier requirements for greater logistical agility and efficiency to support their competitiveness, particularly in continually expanding industries such as e-commerce,” Desmond Tang, CEO of SRE, said in the statement.

“These requirements, together with tenant expansion and consolidation strategies, have rendered most of the current market supply of logistics facilities in South Korea obsolete. Our partnership with IGIS will serve to address this pressing gap in the landscape, where we believe opportunities abound,” he added.

Tang said development properties are expected to generate higher recurring yields than investing directly in completed assets.

Australia expansion

In addition, SRE is expanding its assets in Australia via the Integrated Logistics Partners (ILP) platform, set up nine months ago with Commercial & General, the filing said.

ILP is set to complete the acquisition of a land parcel for a build-to-suit project in Adelaide’s technology park precinct of Mawson Lakes, the filing said. The land will be developed into a purpose-built office and warehouse facility which will be fully occupied by a NYSE-listed blue-chip tenant on a long-term lease, Straits Trading said.

The total development cost is estimated at A$44.3 million, or around S$42.2 million, and is expected to be completed by the third quarter of 2020, the filing said.

ILP has a portfolio of five assets so far, the filing said.

So far, SRE’s logistics portfolio has three completed income-generating assets and two development projects in Australia, with existing blue-chip tenants including Siemens, Coca Cola Amatil and Incitec Pivot, the filing said.

“Upon completion of its Australian and South Korean development pipeline, income generated from those projects is expected to be yield accretive,” Straits Trading said. “Furthermore, newly developed state-of-the-art properties secured with strong tenancies will enhance the overall appeal of the portfolio.”

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