New £330M Backer Steps In As Koreans Back Away From 2.9M Jaguar Scheme

A deal with a Korean investor to back Jaguar Land Rover’s new 2.94M SF Midlands campus looked like a sure thing.

Now, as the future of the auto sector feels less secure and as Korean investors struggle to digest a mighty haul of European investments, a new investor has stepped in to replace a Korean consortium that has now pulled out.

A bid from Korea Investment & Securities in tandem with Knight Frank Investment Management and LB Asset Management has come to grief, React News reported.

Instead debt fund manager and lender ICG is in talks to fund the campus, but with the yield slightly blunted.

The deal has been revalued at £330M, down from £350M, and the yield drops back from a keen 4.75% to a still good, but more restrained, 5%.

South Korean investors spent heavily in Europe in 2019, their $12.4B outspending even the Chinese and Hong Kong-based buyers in the hunt for European real estate. As 2020 began they still seemed intent on growing their property portfolios, JLL reported at the time, with real estate debt a focus of their interest thanks to low fixed interest rates. 

During the lockdown Korean investors were said to be “pining” for a return to European markets, this time hunting out deals in off-piste locations such as central and eastern Europe. Pressure to deploy a large asset base, having exhausted both the local and more obvious international options, was said to be behind the urge.

Since the summer the mood has changed, as the JLR deal shows. The spending spree has left South Korean investors with an estimated $7B of yet-to-sell-down assets, mostly in mezzanine or equity tranches. In an unpredictable global market, this exposes them to risk senior lenders might avoid, plus gathering doubts about the future of traditional office space has hit valuations and prospects. The value of unsold assets is about 600% greater than usual in the South Korean investment world, the Korea Economic Daily reported.

In the case of the JLR deal, the lack of certainty over government support for the auto sector helped to undermine the deal. The mid-August 2020 failure of talks between the UK government and JLR owner Tata Steel to agree financial support under the Project Birch scheme to support coronavirus-afflicted business was probably the nail in the coffin of the South Korean buy.

JLR and IM Properties have been in talks about a 2.9M SF auto parts distribution centre near Birmingham since last year.

The after-sale parts distribution depot will focus on the 238-acre Appleby Magna site, close to junction 11 of the M42 motorway. The campus location, acquired by IM Properties in 2016, was one of a handful of Midlands sites capable of delivering a development of this size.