ARA Teams Up With Korea’s NH Investment for $897M Seoul Office Buy

ARA Asset Management has completed Seoul’s biggest building buy this year, picking up a newly completed office tower in a deal valued at KRW 1 trillion ($897 million) according to a statement on Tuesday.

The Singapore-based investment manager has purchased Tower II of the city’s Parc1 complex on behalf of a private fund, with Korea’s NH Investment & Securities taking a 22 percent stake in the newly formed vehicle, according to an ARA representative who spoke with Mingtiandi.

“We are pleased to extend our longstanding partnership with NH Investments and Securities (NH I&S) to acquire Parc1 Tower II, an iconic, brand new development located in a core area of Yeouido Business District in Seoul,” Anthony Kang, CEO of ARA Korea said in a statement.

The transaction brings the 2020 investment total in Seoul’s commercial real estate market to around KRW 10 billion, which is equal to around 85 percent of 2019’s volume, with more deals expected to be signed before year-end, according to industry sources.

A Big Deal in Seoul

ARA and its investors purchased the 162,216 square metre (1.7 million square foot) property from developer Y22 Project Financing Investment after NH had reportedly been selected as the preferred bidder for the asset in January of this year.

The 53-storey tower is the shorter of a pair of office blocks in the Richard Rogers-designed Parc1 complex and now ranks as Seoul’s fifth-tallest building. Located in the Korean capital’s Yeouido business district, Parc1 is rated Grade 1 under Korea’s G-SEED standard for sustainable buildings.

At the KRW 1 trillion valuation, the deal ranks as Seoul’s biggest acquisition so far in 2020 and the third-largest ever in South Korea. At the stated value ARA, NH and their partners are paying the equivalent of KRW 6.16 million per square metre for the building adjacent to Yeouido Park and Han River Park in an area that is sometimes referred to as Korea’s Wall Street.

“Given its prime location, we expect strong leasing demand,” said ARA’s Kang, while noting that NH Investment has already pre-committed to occupying more than one-third of the tower’s gross lettable area.

International property consultancy Savills began conducting a tender for the sale of the commercial project last year, and a sale and purchase agreement is said to have been signed in mid-2020. ARA Korea has been appointed as the sole asset manager of the property.

A Project 12 Years in the Making

Korean steel maker Posco had agreed to master-lease the 72-storey Tower 1 of the Parc1 complex well before the project’s completion, with Y22 retaining ownership of that building. Now Seoul’s largest mixed-use complex, Parc1 also includes an eight-storey shopping mall and a 30-storey hotel.

The 629,047 square metre project originally broke ground in 2008, before work stopped in 2011. Construction on Parc1 got under way again in early 2017, shortly after Canada’s Brookfield Asset Management teamed up with Chinese sovereign wealth fund CIC to buy the neighbouring Seoul IFC complex for $2.7 billion in November 2016.

With much of Seoul’s office stock already showing its age, Tower 2 is bringing to market column-free floor plates which measure over 3,400 square metres by gross floor area and three metre interior ceiling heights.

Partners Again

Investing alongside NH in the ARA fund are a mix of domestic pension managers, mutual funds and insurance companies, according to ARA representatives.

The Parc1 transaction reunites ARA with NH after the Korean finance firm had invested in a separate ARA fund to purchase Seoul Square in the Korean capital during February of last year. At the time, that KRW 1 trillion acquisition stood as the largest trade ever of a single building in the South Korean capital.

Backed by Warburg Pincus, ARA manages an array of real estate investment trusts and private funds in Korea.

After a slow start to this year due to the COVID-19 pandemic, trades of office building in Seoul surged to KRW 4.6 trillion during the third quarter, or nearly 9 percent more than was traded during the first six months of 2020.

And market sources in Seoul have told Mingtiandi to watch for record-setting South Korean transactions on the way in the coming weeks.

Note: An earlier version of this story indicated that ARA Asset Management was backed by AVIC Trust. That investor had divested in shareholding in mid-2020, and this version has been updated accordingly. Mingtiandi regrets the error.