Singapore private equity firm Keppel Capital has agreed to purchase a set of three Seoul office buildings for a combined KRW 430 billion ($370.5 million), according to an announcement by the firm on Monday.
Keppel Capital is buying the asset trio, including one building each in Seoul’s Yeouido, Gangnam and Gwanghwamun districts, from Korea’s Samsung SRA Asset Management, according to local media reports in Seoul, with the purchase made through Alpha Asia Macro Trends Fund III (AAMTF III), a private equity fund established and managed by Keppel’s Alpha Investment Partners unit.
The office transaction is Keppel Capital’s second Seoul office investment within a week after a unit of the company announced the KRW 252.6 billion purchase of the T Tower on behalf of Keppel REIT on April 23rd.
Combined, the pair of transactions give units of Keppel Capital KRW 682.6 billion in acquisitions after a local REIT invested by the fund manager sold the Seoul Square office building to ARA Asset Management for a reported KRW 1 trillion during February.
Alpha Fund Gains Three Grade A Seoul Assets
“These prime commercial properties are well-located in major business districts of Seoul and have good connectivity and high accessibility to public transportation,” Alvin Mah, CEO of Alpha Investment Partners said in a statement, adding that “Their addition to AAMTF III also aids in the diversification of the fund’s portfolio.”
The most valuable of the office assets is the 21-storey Yeouido Finance Tower on Seoul’s Yeouido island in Yeongdeungpo district, with the building counting Samsung Life and Eugene Corp among its tenants. Samsung SRA had purchased the 42,346 square metre asset for KRW 169.7 billion in 2009.
In that same year, the Korean firm also spent KRW 73.8 billion to purchase the Nonhyeon Building, an 18,606 square metre Gangnam asset which is now among the set being acquired by the Alpha fund. That 20-storey property is home to Samsung Electronics and Hanwha Life Insurance subsidiary Hanwha Financial Asset, among others.
In the Gwanghwamun central business district Keppel Capital is purchasing the 13,007 square metre Naeja Building from Samsung SRA. The Korean firm had acquired the grade A office building, which has local law firm Kim & Chang as its anchor tenant, for a reported KRW 52 billion, also in 2009.
Samsung SRA Collects Capital Gain of KRW 134.5B
Together, AAMTF III is acquiring 73,959 square metres of grade A office space in Seoul for KRW 5.81 million per square metre, according to Mingtiandi calculations. The transaction is expected to be completed before the end of June.
As part of the sale and purchase agreement, Keppel Investment Management Co., Ltd. (Keppel Investment Management), the asset management arm of Keppel Capital in South Korea, will be appointed the local asset manager for the three properties, according to the statement.
For Samsung SRA, the agreement with Keppel Capital provides the Korean firm with an opportunity to dispose of the three freehold buildings at a capital gain of KRW 134.5 billion from its reported 2009 acquisition costs, or a 45.5 percent increase in valuation.
Keppel Finds Opportunity to Re-invest Seoul Square Proceeds
Today’s deal announcement comes after Keppel Capital was chosen as the preferred bidder for the three properties at the end of February, with the company qualifying as one of only two potential buyers expressing interest in buying the asset trio as a set, according to local media reports at the time.
When it reached a $1.1 billion final closing on AAMTF III in January Alpha had included Seoul as one of the target markets for the funds acquisition strategy, along with Singapore, Shanghai, Beijing, Tokyo, Sydney, Melbourne and Brisbane.
This week’s set of three acquisitions by the Keppel unit, along with last week’s purchase by Keppel REIT, are part of a surge of interest in Seoul opportunities that drove transactions in the Korean capital up by 68 percent during the first quarter of 2019 compared to the preceding three months.
“Driven by both foreign and domestic investors, real estate investments have been strong in Seoul,” Robert Sung, CEO of Keppel Investment Management, said in the statement. “The office sector is expected to see limited supply over the next few years while leasing demand is projected to remain steady.”
Total investment transactions in Seoul and the adjacent Bundang district reached KRW 1.9 trillion from January through March of 2019, according to a recent report by Cushman & Wakefield, with KRW 1 trillion of that volume coming from ARA Asset Management’s purchase of the Seoul Square building in February.
The seller in the landmark Seoul Square deal was KR1 CR REIT, a locally-listed trust whose largest shareholder is a division of Keppel Capital.