PAG has signed a memorandum of understanding with Hyatt Hotels Corporation to acquire the Grand Hyatt Seoul for approximately KRW 500 billion ($410 million), according to market sources cited in the Korea Economic Daily.
The investment management firm led by Weijian Shan is said to be carrying out due diligence on the 615-room hotel, with a sale expected to be agreed in October.
The proposed acquisition includes nearby land totalling 8,757 square metres (94,260 square feet) that PAG is said to be interested in developing as luxury homes. South Korea’s Meritz Securities is reportedly being considered by the Hong Kong-based firm to underwrite financing for the reported investment plan.
Following the proposed sale, Hyatt would continue to manage the hotel under its Grand Hyatt brand, according to market sources.
Korean Hotel Deal in Sync With New Funds
The move by PAG follows reports last week that the investment firm had started raising capital for a new $2 billion fund – SCREP VII – that aims to invest in high-yielding real estate projects across Asia.
That opportunistic vehicle is being set up after PAG, in February of this year, had reached a $1.5 billion first close on its second core plus/value-add real estate fund, PAG Real Estate Partners II.
Should the Seoul transaction proceed, PAG will be acquiring the hotel and nearby land for KRW 100 billion less than the reported KRW 600 billion asking price for the asset. The hotel is said to have been put on the market three months ago with JLL acting as sole agent on behalf of the seller.
PAG has yet to make a public statement regarding the proposed purchase and company representatives reached by Mingtiandi declined to comment on the report.
Height of Luxury Popular with the Queen and Princess Diana
Renovations of the 1978-vintage Grand Hyatt Seoul, which has been popular over the years with visiting heads of state, royalty and celebrities , were completed in May, adding a further 14 rooms.
Fifty-three of the hotel’s 615 rooms are suites, while the property also boasts 12 restaurants and bars, a spa, and 19 meeting spaces.
The hotel’s presidential suite, which measures 337 square metres, has 360-degree views of the Han River and Mount Namsan, with past guests including Queen Elizabeth II, Prince Charles and Princess Diana.
The 200 square-metre penthouse ambassador suite can be linked up with the presidential suite to provide guests with space for a secretary’s office, a private gym, or a media-communications strategy room, according to the hotel’s promotional literature.
Although prices for the presidential and ambassador suites are only available on request, the 91 square-metre diplomatic suite, which comes with a marble bathroom, is priced on Hyatt’s website at KRW 875,000 per night.
Standard double rooms with a river view, measuring 30 square metres, are listed at KRW 275,000 per night.
Located at 322 Sowol-ro, the hotel is ten minutes from downtown Seoul by car and 20 minutes to the Yeoui-do financial district, while the Itaewon shopping street is a ten-minute walk away.
PAG Targets Seoul Again
The proposed deal could be PAG’s second acquisition in Seoul in just over two years, after the investment firm purchased the 20-storey POBA Gangnam Tower in 2017, at a time when North Korea’s nuclear rhetoric had caused some investors to go lukewarm on its neighbour to the south.
PAG bought the 45,000 square metre office project from a fund led by POBA for KRW 310 billion, paying over KRW 23 million per pyeong (3.3 square metres). Even with the South Korean security concerns that deal still set for the highest price paid per unit of office space in that part of Seoul.
Property services firm JLL said in its Hotel Investment Highlights report that South Korea, having established itself as a key regional investment destination for hotel investors last year, has continued to draw investment appetite during the first half of 2019.
Just four months ago, Singapore-listed Datapulse Technology and Bizcentre Capital, a unit of Malaysian developer Plenitude Berhad, established a 15:85 joint venture to buy the 224-room Holiday Inn Express Euljiro hotel for KRW 59 billion.
That transaction followed Datapulse’s acquisition of the 127-room Hotel Aropa in Seoul for KRW 35 billion in December last year.
Ascendas Hospitality Trust made another Korean hotel acquisition in the same month, buying the Ibis Ambassador Seoul Insadong for KRW 77.5 billion.
According to JLL, the freehold nature of the hotel market in South Korea, as well as the continued growth of tourism in the country, are expected to continue to fuel investor interest.