A South Korean brokerage firm with a 50.1% stake in Amazon’s largest distribution center in Japan is seeking to list a real estate investment trust (REIT) backed by a stake in the warehouse facility and an office complex in Seoul on the domestic bourse.
NH Investment & Securities Co. Ltd. joined forces with SK D&D Co. Ltd., a Korean developer, to launch the REIT that is tipped to be the country’s first multi-asset REIT, after the SK Group unit acquired the Seoul office complex for around 540 billion won ($451 million) in May.
They will list the REIT as early as October, upon receiving approval from the Ministry of Land, Infrastructure and Transport, sources from NH Investment and the financial investment industry said on July 27.
Its two underlying assets are worth around 310 billion won ($259 million), including 93.4 billion won worth of stakes in the real estate fund used for the 150-billion-won purchase of the 50.1% stake in the Amazon facility.
The Amazon facility located in Odawara, 80 km southwest of Tokyo, comprises 30% of the portfolio, with the Seoul office complex accounting for the remaining 70%.
NH Investment bought the stake in the Amazon’s Japan facility that has a net leasable area of 200,000 square meters in January. Nuveen Real Estate, a unit of the Teachers Insurance and Annuity Association of America, bought the remaining 49.9% simultaneously. They acquired the property from the Blackstone Group reportedly for 40 billion yen ($380 million).
At the time, a source with knowledge of the matter said that NH Investment may retain part of the investment through a REIT, if it was unable to sell it down to domestic investors.
The REIT is expected to offer an average dividend yield of around 6.5%, expanding its portfolio into various types of real estate assets both at home and abroad.
It is not yet known how much it plans to raise from the IPO.
Unlike many other REITs, this REIT will be unfettered by the Korean regulations banning public investment funds and equity-traded funds from investing in REITs backed by equity interests in real estate funds and those backed by stakes in other REITs. That is because the stake in the Amazon facility, used as an underlying asset, represents less than 40% of the total portfolio.
Such restrictions have been cited as an obstacle to pushing REITs’ shares further higher.
Additionally, South Korea loosened rules that limit levels of listed REITs’ ownership in private real estate funds in March.
“From the moment when we acquired the Amazon distribution center in January, we thought about the IPO of a REIT,” an NH Investment source told the Korean Investors. “We have waited until the listed REITs’ ownership limits on private real estate funds were eased before working on the REIT.”
Initially, SK D&D had prepared a separate IPO for the Seoul office complex-backed REIT and hired NH Investment as the lead manager.
While working on the IPO, they agreed to expand the portfolio by combining the Seoul property with a stake in the Amazon facility.
“This is a new type of REIT backed by an overseas Amazon logistics center which recently emerged as a hot investment area and a large office building generating steady rental incomes,” the NH Investment source added.
Meanwhile, IPOs of three Korean REITs, including two REITs backed by overseas properties, received tepid responses from investors this month.
JR Global REIT, set to be South Korea’s first listed REIT backed by overseas property, was undersubscribed 0.23 times by individual investors in the book building process between July 22 and 24. It will be listed in early August.
Mastern Investment Management Co. Ltd. on July 20 postponed the IPO of the REIT backed by the Crystal Park office complex in France by a couple of months, citing lukewarm responses from institutional investors.
By Seonpyo Hong
<Edited by Yeonhee Kim>