[THE INVESTOR] Global private equity giant Blackstone is joining the race to acquire brand-new twin office towers in central Seoul worth about 1 trillion won (US$923 million), according to industry sources on Feb. 28.
Other local asset management firms like IGIS, Mastern and Pacific have submitted their intention to purchase the buildings during the preliminary bid held on Feb. 27. Millinium Inmark, the Korean joint venture of Australia’s Inmark Group and Millinium Capital Managers, also joined the bid along with Korea Post, the nation’s postal service provider and the second-largest institutional investor.
The Centropolis twin towers in central Seoul
Samsung nears deal to acquire Seoul building for record price
The 26-story twin office towers, called Centropolis, are located on a 7,900 square-meter site in Gongpyeong-dong, with the whole floor space totaling 141,474 square meters.
The deal price is expected to exceed Korean builder Booyoung Group’s 900 billion won purchase of KEB Hana Bank building in Euljiro in December -- the most expensive commercial building traded in Seoul last year.
The high vacancy rate may be an immediate issue given that the building is due for completion in June this year. But investors seem to be paying more attention to the future profits.
Due to the Seoul City government’s strengthened building height limits, those higher than 90 meters are not allowed to be built within the city center area. The 113-meter-high Centropolis is the last building to get the approval.
Amid the tight supply in central Seoul, there is high demand for landmark buildings among investors hunting for lucrative deals. US private equity firm Kolberg Kravis Roberts and Hong Kong-based investment firm LIM Advisors earned a profit of almost 200 billion won in their three-year ownership of K-Twin Tower, the 22-story twin buildings adjacent to Centropolis that were sold to Samsung’s SRA Asset Management for about 720 billion won in December.
Over the past years, Korean investors have been winning big deals in Seoul, however, the source said that doesn’t mean foreign investors have lost interest in the local real estate market.
“Empty offices will not be an issue in the long term. The final bidder would seek to elevate the buildings’ value by having more attractive, big name tenants,” said an industry source on condition of anonymity.
“Korean investors are just betting bigger than their foreign rivals. Global investors will continue to keep their eyes on the local market,” she added.
In November 2016, Blackstone purchased Capital Tower, now Acroplace, in Yeoksam-dong, southern Seoul, for 450 billion won from Mirae Asset Global Investments. It was the firm’s first office purchase in Korea.
The developer City Core and deal managers Savills Korea and Mateplus plan to select a preferred bidder next month.
By Lee Ji-yoon (firstname.lastname@example.org)