CapitaLand Fund Buys Seoul Office Tower From Korea’s NPS for $330M

Singapore’s CapitaLand Investment has completed its KRW 440.8 billion ($330 million) purchase of the Golden Tower office building in Seoul’s Gangnam business district from South Korea’s NPS on behalf of a new private fund.

The fund management arm of property giant CapitaLand recently closed the private vehicle with a total equity commitment of KRW 200 billion, the Temasek-controlled firm said in a release. Described as a value-add blind pool fund, the vehicle is a partnership with KB Bank, an affiliate of Korean financial giant KB Financial Group.

“Leveraging our deep market knowledge, deal sourcing capabilities and investment expertise, we secured Golden Tower in an off-market deal for our new value-add office fund,” said Min Il Sung, CapitaLand Investment’s head of Korea capital markets. “Seoul’s office market remains one of the most resilient in Asia with the lowest vacancy rates.”

Mingtiandi reported in May that CapitaLand Investment was in talks to buy Golden Tower after having been chosen as the preferred bidder for the 21-storey asset by real estate fund manager Koramco, which held the property on behalf of NPS, the world’s second-largest pension fund. Local media had identified KB Bank as the Singaporean firm’s partner in the deal.

Value-Add Work Ahead

Koramco, which also uses the building at 144-17 Samseong-Dong as its headquarters, is understood to have held discussions with local investment firms Daishin Asset Trust and Mastern Investment Management regarding Golden Tower, after first putting the asset on the market in July 2023 at an asking price of KRW 490 billion.

CapitaLand Investment and KB Bank were said to be acting as 50:50 partners in acquiring the 40,479 square metre (435,712 square foot) property for the equivalent of KRW 10.9 million per square metre, or about 10 percent below Koramco’s asking price in last year’s marketing effort. In its statement, CapitaLand Investment said it held “a sponsor stake in the fund in alignment with the interests of its capital partner.”

By year-end, the partners plan to start making improvements to the 1995-vintage building’s lobby, facade and mechanical, electrical and plumbing components, with the work scheduled to conclude by the third quarter of 2025.

The Golden Tower acquisition boosts CapitaLand Investment’s Korean office exposure after the firm last year sold the Citibank Centre in Seoul for S$167 million (now $128 million). The company’s other office property in the South Korean capital is the 14-storey Jongro Place in Jongno-gu.

The new investment vehicle increases CapitaLand Investment’s funds under management in South Korea by 16 percent to S$3.3 billion ($2.5 billion) and marks the maiden collaboration between the firm and KB Bank.

“We look forward to strengthening the partnership with more co-investment and fund opportunities in the future,” Min said.

Overtaking Shanghai

The red-hot Seoul 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 reclaimed the No.2 spot it lost to Shanghai last year.

“Seven office deals each valued at more than $100 million took place in the second quarter, including the only single-asset office deal globally this year that exceeded the $1 billion volume mark,” the data provider said.

MSCI was referencing Daishin Asset Management’s $1.02 billion forward purchase of a redevelopment project from a joint venture of IGIS Asset Management and Kyobo Life Insurance. Other large office deals in the first half included Koramco’s $593.1 million acquisition of Arc Place in Gangnam from private equity giant Blackstone.