ARA Korea Buying Conrad Seoul Hotel from Brookfield for $289M

The Korean unit of Singapore-based real estate fund manager ARA Asset Management has agreed to acquire the Conrad hotel in Seoul from Canadian pension giant Brookfield Asset Management, after a travel rebound saw the number of international tourists in the first quarter recover to 88.6 percent of 2019 levels, according to Korea’s Ministry of Culture, Sports and Tourism.

ARA Korea, through its private equity arm ARA Korea REF Limited, finalised a purchase agreement for the 434-key hotel on 3 June, with sources close to the transaction confirming to Mingtiandi that the asset changed hands at a price in excess of KRW 400 billion ($289 million), which works out to $666,854 per key.

“This acquisition comes as the hotel industry is showing signs of recovery post-COVID-19 pandemic, with an increasing preference for luxury hotels among the MZ (millennial and gen-Z) generation and a continuous rise in foreign visitors, leading to an increase in the hotel’s value,” Anthony Kang, chief executive of ARA Korea said in a release on Tuesday. “The outlook for the hotel industry remains positive, and we plan to continue seeking similar opportunities both domestically and internationally.”

The deal comes as overall revPAR of Korea’s luxury hotel segment reached KRW 209,317 in the first quarter, representing a 12.9 percent year-on-year increase and surpassing 2019 levels by 53.7 percent, according to JLL.

Heart of Seoul’s Financial District

ARA Korea is acquiring the hotel situated within Brookfield’s International Finance Centre (IFC) commercial complex in Seoul’s Yeouido financial district at a roughly 20 percent discount to the reported KRW 500 billion price that Brookfield sought when it began marketing the 5-star hostelry in September.

The marketing exercise, in which consultancy JLL served as exclusive adviser to Brookfield, saw ARA Korea outcompete global and domestic bidders that were said to have included private equity titan Blackstone, Singapore’s Keppel Ltd, and Seoul-based buyout firm Gravity Asset Management, with ARA Korea having emerged as the preferred bidder for the Hilton-managed property in March.

“Conrad Seoul is an excellent asset that is performing strongly since we bought it in 2016 and improved its operations,” said Ankur Gupta, Brookfield’s head of Asia Pacific and Middle East real estate. “It also benefits from favourable tailwinds given the recovery in travel from the pandemic. We continue to proudly own and operate IFC Seoul and look forward to our ongoing growth in Korea, which is a key market for us in Asia Pacific and a dynamic and innovative economy.”

The transaction comes three months after HKEX-listed industrial property investor and developer ESR, which has owned ARA Asset Management since 2022, agreed to sell ARA’s private funds management business in Korea, Singapore, Australia, and USA to Japan’s Sumitomo Mitsui Finance and Leasing Co, Japanese fund manager Kenedix, and ARA chief executive Moses Song, with that deal yet to close.

Failed First Sale Attempt

Brookfield, which beat out Blackstone to acquire IFC Seoul in 2016 from insurance giant AIG for $2.7 billion, had agreed to sell the entire 505,000 square metre complex in 2022 to Korean investment firm Mirae Asset for roughly $3 billion, with that deal having broken down after Korean authorities asked Mirae to reduce the level of debt for financing the acquisition.

Brookfield subsequently cancelled the purchase agreement that would have ranked the transaction as South Korea’s largest real estate deal that year, with Mirae having then pursued arbitration against Brookfield in an attempt to reclaim its KRW 200 billion ($140 million) deposit.

According to local media accounts, Brookfield now intends to divest the complex, which comprises three office towers and a three-level shopping mall in addition to the Conrad, in phases, as high interest rates limit the ability of potential buyers to finance a purchase of the entire development.

The acquisition adds to ARA Korea’s holdings in the Korean capital, which include the Parc.1 Tower II office building, which the fund manager acquired in 2020 for KRW 1 trillion, as well as the Seoul Square office block purchased in 2019, also for KRW 1 trillion.

“Through this acquisition, ARA Korea aims to strengthen its presence in the Yeouido area, combining the brand value of Conrad Seoul with ARA Korea’s global asset management capabilities to maximise the hotel’s profitability,” said Kang.

ARA Korea, which oversees two REITs through ARA Korea Ltd and eight real estate private equity funds through ARA Korea REF Ltd, managed KRW 3 trillion of domestic and global assets as of 2024.

Tourism Rebound

ARA Korea’s purchase comes as JLL expects tourist arrivals to recover to pre-pandemic levels by the end of 2024, after mainland China in the first quarter reclaimed its spot as Korea’s top source of visitors for the first time since 2019, reaching 73.7 percent of visitor levels for the period that year.

The rosy tourism outlook was echoed by Colliers, which sees growing investor interest in Korean hospitality assets amid a recovery in the sector’s operating performance. Overall average daily room rate in the sector increased by 32 percent from KRW 122,128 in 2019 to KRW 160,684 in 2023, according to the consultancy, citing data from the Korea Hotel Business Association.

“As we expect stabilisation in interest rates and a recovery in the number of tourists to pre-pandemic levels from the continuous influence of Hallyu (Korean Wave), investment interest in hotel assets is expected to rise again,” said Judy Jang, director of research at Colliers in Korea. “Despite the Korean economic uncertainty, international luxury hotel operators are actively entering the Korean market. With the growing popularity of K-culture and Hallyu anticipated to continue in the near future, global hotel chains and investors are expected to actively seek opportunities to operate in the Korean market.”