Blackstone Sells Seoul’s Arc Place to Koramco Fund for $588M

Blackstone has closed on Korea’s biggest real estate asset transaction of this year, with the company confirming that it has sold Arc Place in Seoul to local fund manager Koramco.

The 62,748 square metre (675,414 square foot) property is changing hands at just over KRW 792 billion ($588 million), according to local news reports confirmed by Mingtiandi. At that level of compensation, Blackstone is selling Arc Place at KRW 12.6 million per square metre (KRW 41.7 million per pyeong).

In a statement, Blackstone attributed the sale in part to asset enhancements made since funds under its core-plus strategy purchased what was then Capital Tower from Mirae Asset Global Investments for a reported KRW 470 billion (then $430.9 million) in 2016.

“Over the years, Blackstone has repositioned Arc Place into a premier, highly-coveted office asset in the heart of Seoul’s Gangnam district, attracting global technology and media tenants,” said Chris Kim, head of real estate for Korea at Blackstone. “We are confident that Arc Place will continue to thrive under the ownership of Koramco and benefit from Seoul’s strong office tailwinds.”

Selling Your Seoul Assets

Blackstone had put the 1998-vintage office building on the market in August of last year with Mingtiandi reporting in October that the New York-based firm had chosen Koramco as the preferred bidder.

Mirae Global Investments and D&D Investment, a real estate investment unit of SK Group, are also reported to have made offers for the 24-storey tower, which was rebranded in 2018 after undergoing an extensive refurbishment.

In local currency terms, Blackstone is selling Arc Place for around 40 percent more than the reported 2016 acquisition price, with that mark-up equal to nearly 27 percent in US dollars, based on the exchange rate at the time of the acquisition nearly eight years ago.

Located at 142 Teheran-ro in the Gangnam business district, Arc Place is home to global occupiers Warner Brothers Entertainment, Dyson, eBay and regional ad agency ADA. Local tenants include Lotte Capital and tech unicorn Viva Republica, according to publicly available information.

Via its investment in what was then the Taubman Asia mall business in 2019, Blackstone also owns a stake in Seoul shopping centre Starfield Hanam as well as having logistics properties in Korea.

Preferred Partner

Koramco had reportedly been conducting due diligence on the purchase since the fourth quarter with local news accounts indicating that the company acquired the asset via a blind fund invested by the Korea Teachers Credit Union and other backers, with listed trust NH Prime REIT also having invested in the asset purchase, according to market sources.

In addition to the Arc Place acquisition, Koramco in October closed on its purchase from Invesco Real Estate of Majestar City Tower B, an office block in Seoul’s Gangnam business district for KRW 520 billion.

In June the fund manager agreed to acquire a 9,587 square metre warehouse in the Icheon suburb of Majang-myeon in Gyeonggi province from ESR Kendall Square REIT for KRW 81 billion.

Hot Korean Offices

While investors, including Blackstone, have been selling down office towers globally post-pandemic, desk space has stayed in vogue in Korea. Institutions acquired over $5 billion in income-earning Korean office assets in 2023, according to MSCI Real Assets, making it the second most active sector-geography combination in Asia Pacific, behind Japanese offices, and just ahead of mainland China retail properties.

“Seoul’s office market is well-established as one of Asia Pacific’s most resilient and perennially attractive asset classes for both global and domestic Korean investors, said Stuart Crow, CEO for JLL’s capital markets team in Asia Pacific, which advised Blackstone on the sale. His colleague, Keehoon Lee, a senior director based in Korea, added that, “We continue to see broad interest in Seoul’s office market from a diverse cross-section of international investors, given high occupancy rates and fairly balanced supply, which we expect to continue.”

With work-from-home continuing to be a foreign concept in Korea, Seoul’s grade A office market saw vacancy fall to just 1.5 percent in the fourth quarter, according to CBRE, while average face rents rose 1.6 percent in the final three months of the year to an average of KRW 34,472 per square metre.

Around 220,000 square metres of new office space is expected to enter the Seoul market this year, with tenants having already committed to 70 percent of that total by the end of 2023, CBRE’s figures show.

In December, Korea’s Mastern Investment Management agreed to sell Centerpoint Gangnam, a nearly-completed office building in Gangnam business district, to local apparel giant F&F for a reported KRW 343.6 billion.

Note: This article has been updated to show that NH Prime REIT invested in Arc Place indepedently of Koramco’s blind fund. An earlier version showed that NH Prime REIT had participated via the blind fund. Mingtiandi regrets the misunderstanding.