Egis Asset Management's land of over 110,000 square meters in Yongin, Gyeonggi Province, which it purchased to build a logistics center, has entered into corporate rehabilitation proceedings (court management). Although more than 30 billion won was invested in the land acquisition, it is now in a situation where it has to be sold again without establishing the logistics center.
According to the financial investment industry and the legal sector on the 9th, the Seoul Bankruptcy Court initiated rehabilitation proceedings for the Egis No. 403 Specialized Investment Private Real Estate Fund (hereafter referred to as Egis No. 403) on the 2nd. The court plans to investigate rehabilitation claims and collateral claims after receiving a list of rehabilitation creditors, collateral creditors, and shareholders by the 16th.
The Egis No. 403 fund is a 20 billion won fund aimed at investing in a logistics center and has received a project financing bridge loan from a consortium including Eugene Asset Management. The fund bought land measuring 117,554.0 square meters in Wanjang-ri, Nam-su township, Cheoin-gu, Yongin City, in May 2021, and has been pushing for the establishment of a 106,406 square meter mixed-use logistics center (ambient + cold). The purchase price was 31 billion won. In August 2022, it received permits for the construction of the logistics center but has not yet started construction.
Nam-su township is also where the government is establishing the Yongin Advanced System Semiconductor National Industrial Complex. The Nam-su Logistics Terminal, which is the largest cold logistics center in Korea with a total floor area of 242,400 square meters and completed by Jisan Group in June 2020, is also nearby. Coupang and Ottogi are tenants of the Nam-su Logistics Terminal.
An investment banking industry source noted, "Before the decision to initiate corporate rehabilitation proceedings, the consent of creditors was required to sell assets (land), but since the rehabilitation proceedings have begun, the sale can proceed without such consent through court approval." He added, "I understand that Egis Asset Management plans to find a buyer for the sale under court permission." Kim Soo-hee, a lawyer at Ahn Sim Law Firm, stated, "Under corporate rehabilitation proceedings, the rights of creditors and debtors are somewhat limited, and assets are sold or rehabilitation solutions are sought based on court judgment, often resulting in relatively quick decision-making."
Egis Asset Management had planned to develop the land into a logistics center and receive rental income for three years before selling it. However, as the project was delayed, they decided to sell the land again, appointing Cushman & Wakefield Korea as the sale advisor last year. In March of last year, the PF consortium did not extend the term of the bridge loan (short-term funds borrowed by the project implementer for land acquisition at the beginning of the PF project), causing a loss of rights to the deadline (EOD). Eugene Asset Management, one of the consortiums, even tried to auction the land.
The fact that Egis Asset Management's logistics center land has entered court management seems to stem from the perception that logistics centers are highly profitable. Since the COVID-19 pandemic, the popularity of logistics centers has surged in the last 3 to 4 years due to an increase in deliveries of perishable goods. However, there has been an oversupply exceeding demand due to a short-term increase in logistics center supply, leading to a decline in business profitability.
According to the commercial real estate service companies, Jinstar Mate and RSquare, as of the third quarter of last year, the average price of logistics centers in the metropolitan area was 5.98 million won per 3.3 square meters for ambient logistics centers and 9.05 million won for cold logistics centers, a decrease of 4.9% and 18.4% from the previous year, respectively. Additionally, as of the end of June last year, the average vacancy rate of ambient logistics centers in the metropolitan area was 16.9%, and the average vacancy rate of cold logistics centers reached 41.2%.
Kim Jae-hee, CEO of Position Asset, remarked, "In the past 3 to 4 years, construction costs have skyrocketed, which has deteriorated the profitability of logistics center projects." He noted, "Particularly for cold logistics centers, the situation of oversupply exceeding demand has led to an increase in cases where businesses exit or incur extra expenses to change their use to ambient."