M&G Confirms $1B Buy of Seoul’s Centropolis — Largest Korean Property Deal Ever

M&G Real Estate, together with a pair of Korean pension funds, has purchased Centropolis Towers in Seoul for 1.18 trillion won ($1 billion). The transaction, the largest single real estate deal in the country’s history, was completed as the office market in South Korea starts to recover after a number of years of weakness.

“Seoul’s office market, particularly the central business district, is in an early upcycle with limited future supply of prime office space,” said Chiang Ling Ng, CEO and CIO of M&G Real Estate, Asia. “Centropolis is well-positioned to benefit from this trend.”

The company, a unit of Prudential Plc, announced the deal in a statement dated 24 July.

Up and Coming Location

The 26-storey, 134,399 square metre, twin-tower complex is set for completion next month. Located in the city’s Jongno District, a three-minute walk from Jonggak Station on Seoul’s Metro Line 1, Centropolis is among a number of megaprojects in the business hub. Analysts expect the building to rent out quickly.

The transaction, which comes out to $7812 per square metre, was completed as the Seoul office market begins to recover. After a period of rapid building, demand for office space in Seoul is now just catching up with supply and occupancy rates are beginning to rise to healthy levels.

The South Korean capital was one of the top ten cities in the world for direct commercial real estate investment in 2017, with just under $15 billion committed to projects, according to JLL.

Completing Deal After KKR Drops Out

The deal took a few turns before completion. In 2017, CTCore, the developer and seller of the property, decided to expand its plan to sell Centropolis from a private transaction to a public auction.

The tender process started in January, with three bidders eventually shortlisted: a Korean group composed of NH Investment & Securities and LB Asset Management; KKR along with IGIS Asset Management, a Korean company; and M&G Real Estate. Blackstone and Korea Post also are said to have submitted bids.

KKR, which had just sold K-Twin Towers to Samsung for 710 billion won in December 2017, eventually locked into negotiations as the was the preferred bidder. But by May, talks had broken down and CTCore went with M&G. Sources say that the two pensions joining it in the bid were KTCU and POBA.

M&G Making Its Way into Asia

M&G Real Estate is the property arm of M&G Prudential, an autonomous business unit of UK insurer Prudential. Of M&G Real Estate’s £30.1 billion under management, 9 percent is in Asia. Of that, 20 percent is in Korea, the second largest asset allocation in the region after Australia.

The company has been aggressively building its portfolio in the Asia Pacific region and says that it has been looking in particular at retail and logistics opportunities. In 2017, it purchased a grade A office, HQ South, in Brisbane for A$119 million.

The company has completed a number of deals in Korea in recent years. In November 2016, it purchased Upsquare, a mall in Ulsan, for $131 million, and late in 2017 it acquired Homeplus Hub Logistics Centre in Ansung City for $136 million. According to at least one published report, M&G teamed up with Singapore’s GIC to buy a 15-storey, 87,710 square metre office building in the Pangyo Techno Valley, though that deal does not appear to have been completed.