Blackstone Teams With Korea’s Blue Cove to Buy Gangnam Tower for $86M

US private equity giant Blackstone has joined forces with Korean asset manager Blue Cove Investment to acquire an office building in Seoul’s Gangnam business district for KRW 120 billion ($86 million), according to sources familiar with the transaction.

Manhattan-based Blackstone is collaborating with Blue Cove and hotel operator Travelodge on the pending deal, with the partners said to be planning to return the property to its original role as a hotel after the acquisition. The seller is Seoul-based conglomerate SM Group, which acquired the 16-storey tower at 662-7 Yeoksam-Dong in 2017 for KRW 43.7 billion.

Local media reported that the 2008-vintage property soared in value after SM Group secured change-of-use permission in July 2023 to reposition the former tourist hotel as an office building.

“Office facilities located in Gangnam are like ‘geese that lay golden eggs’,” the News Dream website said. “This is why the value of the SM Group Gangnam office building has risen.”

Korean Wave

Located near Seonjeongneung and Eonju metro stations, the Gangnam office building spans 14,700 square metres (158,229 square feet) in area and houses tenants including SM Group itself and SM affiliates Dongah Construction and Woobang Industries.

The transaction price equates to more than KRW 8.1 million ($5,800) per square metre. Blackstone declined to comment on the deal when contacted by Mingtiandi. Travelodge and Blue Cove had not responded by the time of publication.

Blackstone’s latest Seoul bet comes after the investment giant teamed with Pebblestone Asset Management to acquire a warehouse facility near the Korean capital for KRW 83.5 billion ($60.4 million).

Blackstone invested in a fund managed by Pebblestone to purchase the Gimpo Seonggwang Logistics Center from DWS, the asset management affiliate of Deutsche Bank, in a deal that closed earlier this month, according to sources familiar with the transaction who spoke with Mingtiandi this week.

The deal adds 29,998 square metres (322,896 square feet) of logistics space to Blackstone’s Korean portfolio, as market analysts see international investors scooping up logistics bargains in a market experiencing a downturn, which some see as temporary.

Hot Hospitality

While Seoul’s office market has starred in most deal reports from the city, hospitality assets have also been attracting foreign investors, with trades of South Korean hotels up 12 percent year-on-year in the first nine months of 2024, according to JLL.

In June, Brookfield Asset Management confirmed its sale of the Conrad hotel in Seoul to ARA Asset Management’s Korean unit for $300 million, with that transaction ranking as Asia Pacific’s third-largest hospitality trade this year, per JLL.

With more than 4,000 South Korean hotel rooms having left the market during the pandemic, revenues for hotel operators have soared as visitors have returned.

Revenue per available room (RevPAR) for luxury and other high-end hotels in South Korea exceeded pre-COVID levels by 70 percent from January through September of this year, with the mid-scale and economy segments also outperforming 2019 levels, JLL found.

With $1.1 billion in Korean hotels having already traded this year, the consultancy expects full-year transaction volume in the segment to reach nearly $1.3 billion in 2024.

Office Trades Rising

Seoul’s office market helped boost the city’s volume of income-generating property investment to $7.4 billion in the first half of 2024, trailing only Tokyo’s $10.1 billion, according to MSCI’s latest Asia Pacific Capital Trends report.

The Korean capital recorded KRW 4 trillion in office trades in the first half of the year, down slightly from the KRW 4.5 trillion in transactions during the same period a year earlier, according to a July report by Cushman & Wakefield.

Mingtiandi reported this week that Singapore sovereign fund GIC had completed the sale of The Exchange Seoul, an office tower in Jung district, to an investor group including South Korea’s National Pension Service and Koramco Asset Management for KRW 247.7 billion ($180 million).

Earlier this month, a private REIT under South Korean fund manager Koramco sold The Asset Gangnam office tower in Seoul to Samsung SRA Asset Management for KRW 1.1 trillion ($820 million). That deal came a month after Singapore’s CapitaLand Investment completed its KRW 440.8 billion ($330 million) purchase of the Golden Tower office building in Seoul’s Gangnam business district from the NPS on behalf of a new private fund.

US developer and fund manager Hines acquired the Seoul headquarters building of Hanssem, a local furniture maker, through a vehicle of Gravity Asset Management in a September deal valued at KRW 320 billion ($235 million).