April 24, 2024

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[THE INVESTOR] Samsung Group, which has been smashing real-estate records in Seoul after years of binge buying and selling, is close to acquiring K-Twin Tower, the 22-story twin buildings in the city center, for a whopping 720 billion won (US$670 million), according to industry sources on Feb. 2.

Samsung SRA Asset Management, a property investment unit of Samsung Life Insurance, has reportedly been named the preferred bidder to purchase the buildings. It is paying about 8.5 million won per square meter, the highest price ever paid for a commercial building in the city.

The current owners -- US private equity firm Kolberg Kravis Roberts and Hong Kong-based investment firm LIM Advisors -- are expected to make a profit of almost 200 billion won in just three years. They purchased the buildings for 5.9 million won per square meter back in 2014.

 

K-Twin Tower in central Seoul

“Samsung’s bidding price far outpaced others. It is a long-held strategy of the nation’s largest real-estate investor that has been leading the overall price surge in the market,” an industry source said on condition of anonymity, adding that much of the funds will be secured through loans.

The K-Twin Tower, completed in 2012, is one of the landmark buildings in bustling central Seoul. The bidding race in December was fierce, with big names like Singapore-based Acendas Fund Management and NH-Amundi Asset Management competing until the last minute.

Along with the perfect location and a low vacancy rate at less than 5 percent, anchor tenants, including Microsoft, WeWork, and Kim & Chang, the nation’s largest law firm, were attractive enough to lure investors. Sources said WeWork, the US co-working company, was offered generous discounts before signing a lease for 35 years recently.

The latest buying comes as Samsung has been selling off its own buildings in recent years possibly to secure more cash.

Like other chaebol here, Samsung’s late founder Lee Byung-chul and his son and current Chairman Lee Kun-hee used to purchase several pricey buildings in Seoul for liquidity purposes. But the third-generation Lee Jae-yong, Samsung Electronics Vice Chairman and the jailed heir apparent on corruption trials, seems to have little interest in real estate.

The junior Lee led Samsung’s key M&A deals since his father’s hospitalization in 2014 and under his direction Samsung sold several buildings, including the decades-old historic office buildings of Samsung Life Insurance and Samsung Fire & Marine Insurance. (The two buildings worth nearly 1 trillion won combined were sold in 2016 to Booyoung Group, a midsized conglomerate whose key businesses include construction.)

On Feb. 1, Samsung C&T, the group’s de facto holding unit, said it is selling one of the three office buildings in southern Seoul. The nascent area was developed by his father as the so-called Samsung Town as it served as Suwon, Gyeonggi Province-based Samsung Electronics’ Seoul head office.

“Unlike his predecessors, Jae-yong has little interest in real-estate investments possibly due to the volatile market,” said another source who also wished to be unnamed. “More recently, Samsung is purchasing landmark buildings overseas that may be less profitable but more stable.”

In 2016, Samsung SRA Asset Management and other financial units acquired Germany’s Commerzbank’s headquarters in Frankfurt, the tallest office building in Europe, for 900 billion won. Last year Samsung Securities purchased the 500 billion won office building of French energy developer Engie in Brussels, Belgium.

By Lee Ji-yoon (jylee@heraldcorp.com)