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ESR-controlled industrial REIT gears up for W357.3b IPO

A logo of ESR Kendall Square REIT
A logo of ESR Kendall Square REIT
South Korea’s real estate investment trust, indirectly controlled by Hong Kong-listed real estate platform ESR, said Monday that it is gearing up for an initial public offering that will raise 357.3 billion won ($321.3 million) before a listing on the main stock bourse, Kospi, to attract retail investors to its industrial portfolio.

The new REIT, dubbed ESR Kendall Square REIT, will become the first listed REIT dedicated to logistics properties in Korea if the IPO goes ahead as planned later this year. Korea is home to 12 REITs trading on Kospi, according to the Land Ministry.

An institutional tranche will take place from Wednesday to Dec. 2, while the stock subscription will be open to retail investors from Dec. 4 to Dec. 8. Korea Investment & Securities, Citigroup Global Markets Korea Securities and the Morgan Stanley Co. & International Seoul branch will underwrite the stock flotation.

The REIT will invest in securitized industrial assets valued at a combined 1.4 trillion won, while end-investors of the REIT on the stock market will pursue a comparatively high dividend income, with at least a 5.38 percent dividend yield.

Its portfolio will comprise 11 logistics facilities located in cities in Gyeonggi Province such as Goyang, Yongin and Bucheon, with a combined 684,094-square-meter gross floor area. ESR Kendall Square REIT said a majority of its tenants are beneficiaries of the recent growth of the e-commerce market amid the pandemic.

ESR Kendall Square REIT Management said it has drawn a 360 billion won investment in a recent pre-IPO deal from institutional investors including the Canada Pension Plan Investment Board, the Military Mutual Aid Association and Korean Re.

ESR Kendall Square REIT will be managed by Seoul-based Kendall Square REIT Management.

The company is a sister company of Kendall Square Asset Management, overseeing 1.96 trillion won worth of properties as of Friday. Both are 100 percent owned by ESR’s Korean property development subsidiary ESR Kendall Square -- formerly known as Kendall Square Logistics Properties.

The news comes as a renewed prospectus for the REIT with 11 logistics facilities in the portfolio went into effect on Sunday after garnering an approval from the Land Ministry in October, excluding a logistics center in Bucheon that was roughly valued at over 800 billion won.

The IPO will mark another step in ESR’s push to cultivate logistics investment opportunities in Korea.

In April, ESR announced plans to create a new $2 billion won joint venture vehicle in Korea to invest in and develop logistics warehouses in Seoul and Busan, by pouring in a $1 billion commitment along with Dutch investor APG Asset Management and CPPIB. This is the second joint venture entity of its kind, following a $500 million joint venture for logistics development unveiled in 2015.

By Son Ji-hyoung (consnow@heraldcorp.com)
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