Brookfield Confirms $300M Deal to Sell Conrad Seoul to ARA Korea

Brookfield Asset Management announced that it has agreed to sell the Conrad hotel in Seoul to ARA Asset Management’s Korean unit for $300 million, confirming last week’s Mingtiandi report on the transaction.

ARA Korea, through private equity arm ARA Korea REF Ltd, is acquiring the hotel at Brookfield’s International Finance Centre complex in Seoul’s Yeouido district at a roughly 20 percent discount to the reported price sought by the Canadian giant when it began marketing the five-star hostelry last September.

Brookfield said Monday that the deal demonstrated the strong and enduring demand for best-in-class real estate worldwide and the strength and maturity of the asset manager’s Asia Pacific franchise.

“Our experience buying, selling and operating high-quality assets allows us to continue to deliver value for our investors throughout market cycles,” Brian Kingston, CEO of Brookfield’s real estate business, said in a release.

Divestment in Phases

Brookfield, which beat out private equity titan 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 (5.4 million square foot) 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 434-key Conrad — in phases, as high interest rates limit the ability of potential buyers to finance a purchase of the entire development.

The agreed sale price for the 2012-vintage hotel works out to $691,244 per key. The divestment follows Brookfield’s recent disposals of a 49 percent stake in the ICD Brookfield Place complex in Dubai and two Grade A commercial assets in India at a combined value of $3.5 billion, the company said Monday.

Once completed, the Conrad transaction will represent the largest single-asset hotel sale in South Korea in 2024, according to JLL, which advised Brookfield on the deal.

“The Conrad Seoul transaction will reaffirm our confidence in the continued interest in the Korean hospitality market as the hotels’ performance stabilises robustly,” said Nihat Ercan, CEO of JLL’s APAC hotels and hospitality group. “We also take great pride in JLL’s ability to pair the first sale of a Korean hotel asset to a globally recognised investor in 2024, highlighting our strength in connecting international capital with local opportunities.”

Catching the Rebound

ARA Korea’s trophy purchase comes after a travel rebound saw the number of international tourists in the first quarter recover to 88.6 percent of 2019 levels, according to South Korea’s Ministry of Culture, Sports and Tourism.

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 South 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 average daily room rate in the Korean hotel sector rose 32 percent from KRW 122,128 in 2019 to KRW 160,684 last year, according to a Colliers report citing data from the Korea Hotel Business Association.