Straits Trading unit expands logistics footprint with Korea and Australia buys

Once fully deployed, Straits Real Estate expects a portfolio value in excess of $700m.

Investment firm Straits Trading Company, through its unit Straits Real Estate (SRE), is stepping up its investment in the logistics sector with a new partnership in South Korea and a new development project in Adelaide, South Australia, an announcement revealed.

In South Korea, SRE has struck a new strategic partnership with IGIS Asset Management (IGIS) to create a portfolio of modern logistics facilities focused on the Greater Seoul area, alongside an initial capital commitment of approximately $127m (KRW110b).

The joint venture has since made its maiden investment, with a 50% interest in a 62,217-sqm freehold site in Incheon, South Korea that is slated to be developed into an approximately 190,000-sqm, five-storey ramp-up logistics facility. IGIS will be responsible for providing development, leasing, and asset management services. Construction is expected to commence in July 2019 and be completed by Q1 2021.

Once fully deployed, it is expected that initial commitment will have a portfolio of up to $470m (KRW400b).

According to SRE CEO Desmond Tang, the firm will look towards committing additional capital resources as it believes this opportunity will remain attractive for the near to mid-term. “Moreover, once completed and stabilised, these properties will generate higher recurring yields for SRE vis-à-vis investing directly into completed assets,” Tang added.

Aside from its new venture in South Korea, SRE is expanding its presence in Australia through its Integrated Logistics Partners (ILP) platform with Commercial & General (C&G) which was established in 2018.

Having aggregated a portfolio of five assets to date, the $117.42m (AUD125m) capitalised ILP is about to complete the acquisition of a land parcel for a build-to-suit project in Adelaide. The project, on a 37,958-sqm freehold site at Adelaide’s central business district in the “Technology Park” precinct of Mawson Lakes, is slated to be developed into a 14,665-sqm purpose-built office and warehouse facility and will be 100% occupied by an NYSE-listed blue-chip tenant on a long-term lease.

Total development cost for the project is estimated at $42.2m (AUD44.3m) and is targeted to be completed by Q3 2020. When completed, this Mawson Lakes project, along with its Kilkenny development, which is expected to complete in Q4 2019, will reportedly extend SRE’s overall portfolio weighted average lease expiry (WALE) to 8.8 years from 7.3 years.

With total allocated capital of approximately $220m, SRE’s expansion into the Asia Pacific logistics sector is largely driven by positive sector outlook and attractive risk-adjusted returns. Including these latest projects, SRE has already deployed and/or committed $120m into seven logistics projects with an expected portfolio value of approximately $38m. Once fully deployed, SRE expects a portfolio value in excess of $700m.