Korea’s MDM Backs Gaw San Francisco, Tokyo Buys in Outbound Drive

In recent months Korean investors have been reported to have lost as much as 70 percent on US office investments made before the pandemic, but institutions from the home of BTS and Blackpink may still be open to new opportunities in the land of freedom, with a Seoul-based asset manager recently coming out as having backed Gaw Capital Partners acquisition of a San Francisco office project late last year.

MDM Asset Management said earlier this month that it is a co-investor in Gaw Capital Partners’ $90 million October acquisition of the North Park campus on the Embarcadero waterfront from Blackstone, with the firm explaining the deal as part of an overseas expansion plan.

“We are investing in creating new markets, looking beyond the immediate crisis to the distant future,” MDM International chief executive Kim Jae-chan, told local media. “We will selectively invest in various global partnerships and overseas high-quality assets, considering the economic downturn as an opportune time for investment.” Gaw Capital had not responded to inquiries from Mingtiandi by the time of publication.

Showing a taste for opportunistic deals, MDM also backed Gaw Capital’s $409.3 million joint acquisition of the Hyatt Regency Tokyo hotel with KKR in March last year, the Korean firm said, as that property’s owner, transportation giant Odakyu Electric Railway, continues to reel from the impact of the pandemic.

Digging into Discounts

In San Francisco, Gaw and MDM achieved around a two-thirds discount when acquiring the low-rise commercial complex, compared to the $245 million that Blackstone had paid to buy the property from Gaw Capital in 2018. In speaking to Korean media, MDM described the investment as a vote of confidence in San Francisco’s resiliency.

“Given the excellent surrounding environment and the city’s ability to swiftly overcome global financial crises, it is a preferred location for information technology companies and investment firms,” MDM said, expecting the asset to overcome the challenges of the global market thanks to its location.

Office vacancy in San Francisco has climbed for 15 straight quarters with more than 30 percent of Grade A space in the city left unoccupied at the end of September, which was up by 25 percentage points from the end of 2019, according to a report from JLL.

MDM’s belief in the US market comes despite its compatriots at Mirae Asset Global Investments having reportedly taken a 30 percent haircut last October when they sold a four building office complex in Dallas for $580 million. A Mirae US real estate fund which matured in May of this year is said to have lost 70 percent of its value as its office bets went bad.

Together in Tokyo

In Japan, MDM backed Gaw Capital’s investment in the 746-room Hyatt Regency, with the Korean firm describing the deal as an opportunity to profit from financial disruption in the wake of COVID-19.

“During the pandemic, many Japanese corporations faced liquidity issues, which led to the Hyatt Regency Hotel being offered for sale at a discounted price. With the relaxation of epidemic measures and increase in tourism with trends like ‘revenge travel’, it was a good opportunity to invest in undervalued assets during the COVID crisis. Since the hotel has aged, we plan on doing interior renovations over the next two years before reselling,” a representative from MDM told local media.

Odakyu Electric Railway, one of Japan’s largest travel companies, described the sale of the  71,512-square-metre luxury hotel as part of a larger effort to restore the company’s financial health and restructure its business portfolio after the pandemic.

Situated next to Shinjuku Central Park and the Tokyo Metropolitan Government Building, the Hyatt Regency’s new owners are said to have plans to upgrade the 1980-vintage building.

MDM, which has a development business which had supplied 22,775 residential units across Korea as of February 2022, also teamed up with Gaw Capital to make its first overseas acquisition in 2017 when it invested in the Hong Kong company’s third US fund.

Familiar with Korean Capital

In addition to the partnership with MDM, in 2022 Gaw Capital worked with Gangnam-based private equity firm IMM Investment to invest in Dreammark1, a data centre operator in Seoul.

In October 2018, Gaw Capital, Korean Teachers’ Credit Union and other Asian investors agreed to acquire the 4 and 5 Harbour Exchange on London’s Isle of Dogs for £36.2 million.

Gaw Capital teamed with Korean sovereign wealth fund KIC to acquire Hong Kong’s Intercontinental Hotel for $938 million in 2015, with the partners having since reopened that 503-room Kowloon property under the Regent brand.