The Canada Pension Plan Investment Board (CPPIB) has teamed up with Singaporean sovereign wealth fund GIC to buy a landmark office tower in Seoul for 418 billion won ($380 million). The global investment giants will each take a 50 percent stake in the grade A office property, Kumho Asiana Main Tower, which is being sold by the parent conglomerate of South Korea’s Asiana Airlines.
Built in 2008, the 29-storey property is centrally located in the Gwanghwamun area of Seoul’s downtown business hub in Jongno district and serves as the headquarters of the seller, Kumho Asiana Group. The 60,695 square metre tower is also home to the head office of Air Korea — the discount carrier owned by Asiana Airlines — and also hosts Kumho Industrial, Kumho Resort, and Kumho Tire.
Germany’s DWS, formerly Deutsche Asset Management, sourced the property and will manage it after the sale, according to a statement from the buyers. Kumho Asiana Group announced in mid-March it had signed a memorandum of understanding to sell the building to DWS for around 400 billion won ($375 million), according to a local media account.
The Korean conglomerate said at the time that it aimed to complete the sale within the month after working out the detailed terms with DWS.
Korean Group Sells off Downtown HQ Tower
The property is located in a key office precinct that also serves as a government and cultural nexus of the South Korean capital, centred around the main gate of the historic Gyeongbokgung Palace. The tower at 115 1-Ga Shimnun-no enjoys close access to the Gwanghwamun metro station and a range of amenities.
“This investment reflects our confidence in South Korea’s continued growth and commitment to identifying attractive opportunities in this market,” commented Lee Kok Sun, chief investment officer of GIC Real Estate in a statement. “We believe this high-quality, well-located property will generate resilient returns over the long term, and look forward to working with CPPIB and DWS to enhance the value of this asset.”
GIC’s Canadian partners seem to share the sovereign wealth fund’s enthusiasm for South Korea’s prospects — in particular for Seoul office assets.
“The opportunity to invest in one of the largest office markets in Asia through this prime office building fits well with CPPIB’s strategy to invest in top-tier, well-located real estate,” commented Jimmy Phua, the company’s head of real estate for Asia in the statement. “In addition, this investment reflects CPPIB’s desire to increase our investments in the Asia Pacific region, and we’re pleased to do so alongside GIC, one of CPPIB’s long-standing partners.”
The tower is reportedly run by Kumho Asiana Main Tower Co, a vehicle in which Asiana Airlines holds an 80 percent stake. The March statement by Kumho Asiana Group indicated that the proceeds from the sale would be used to pay off debts of Asiana Airlines, which has faced mounting financial challenges.
Just down the street in Jongno district, M&G Real Estate is poised to buy up Centropolis Towers, a twin tower office complex nearby the Jonggak station for an estimated 1.1 trillion won ($1 billion), according to reports, which would mark the biggest single-asset property deal in the country.
Global Fund Managers Expand Korea Bet
GIC, which has an estimated $359 billion of assets under management worldwide, has been a pioneer institutional investor in South Korea’s property sector since the late 1990s. The sovereign fund manager picked up a stake in the G-Square City Retail Complex in the Seoul suburbs for $136 million in 2016, and in December of last year, GIC lodged a failed bid for a new office building in Pangyo Techno Valley near Seoul.
CPPIB managed C$337.1 billion ($268.1 billion) in global assets as of year-end 2017. The Toronto-based firm previously teamed up with GIC in May 2015 to buy the D-Cube Retail Mall in Seoul for $263 million. CPPIB also partnered with APG Asset Management in November of the same year to set up a $500 billion platform to develop modern logistics properties across Korea, in tandem with warehouse builder e-Shang (new e-Shang Redwood) and its local subsidiary.