According to the Ministry of Land, Infrastructure and Transport and the investment banking (IB) industry on the 5th, Coupang and Alpha Asset Management applied for business license for Alpha CLC No. 1 Consignment Management Real Estate Investment Company (Alpha CLC No. 1 Horitz) to the Ministry of Land, Infrastructure and Transport at the end of last month. Coupang and Alpha Asset Management jointly established Alpha REITs Management in October last year. The plan is to create a new REIT through this management company, obtain approval from the Ministry of Land, Infrastructure and Transport, and take over the Coupang Logistics Center.
The acquisition targets include three logistics assets, including Incheon Mega Fulfillment Center (FC), Bukcheonan FC, and Namdaejeon FC. The sale price is expected to total 971 billion won. Alpha CLC REITs Management has already begun raising funds worth a total of 1.058 trillion won, subject to approval from the Ministry of Land, Infrastructure and Transport. It plans to raise equity investments worth 430 billion won from domestic pension funds and mutual aid associations, and also pursue secured loans worth about 604 billion won.
Considering the Ministry of Land, Infrastructure and Transport’s screening standards, it is observed that this REIT approval is likely to be achieved without major difficulties. Alpha CLC REIT Management, which has an established capital of 7 billion won, reinvested 300 million won in capital into the first Alpha CLC REIT. In other words, the legal requirements for establishment of REITs have been met. As Coupang plans to take responsibility for leasing three FCs for the next 15 years and has also promised to increase the rent by at least 2.0-2.5% per year, it is evaluated that the business feasibility, including the dividend plan, is sufficient.
However, as social repercussions and negative public opinion are spreading following Coupang’s personal information leak incident at the end of last year, some are predicting that this will pose some obstacles to the creation and operation of REIT funds. There are concerns that the 900 billion won in funds secured by Coupang may leave Korea and be reinvested in overseas markets such as Taiwan. If Coupang’s sales of Korean assets increase in the future, the possibility of dividends being distributed to American shareholders, including founder Kim Beom-seok, cannot be completely ruled out. An IB industry official said, “The leak of personal information is not a disqualification for approval from the Ministry of Land, Infrastructure and Transport, but the final success or failure of this deal will be determined by whether we can smoothly raise funds from domestic institutions that emphasize ESG.” He added, “The Ministry of Land, Infrastructure and Transport will also closely examine Coupang’s ability to execute long-term leases by considering the possibility of imposing fines and business suspension.”
The industry believes that if Coupang succeeds in selling its assets, it will be able to proceed with additional asset securitization through Alpha REITs Management. There are observations that this could accelerate the outflow of Coupang’s domestic funds overseas.
Coupang has never recovered funds on such a large scale in Korea in over 15 years since its founding in 2010. Although it has been running a deficit for over 10 years since its establishment, it has been investing domestically by attracting large amounts of funds from global institutions such as Softbank Vision Fund whenever funds are insufficient. In addition, it was listed on the New York Stock Exchange in 2021 and raised funds worth $4.5 billion (about 5 trillion won at the time). The company explains that since its establishment, it has invested a total of 6.2 trillion won in developing about 100 logistics centers in 30 regions of Korea by 2023.
https://n.news.naver.com/article/011/0004574950
It seems like they are planning to turn all of their domestic assets into a can, extract everything they can, and then run away.