City Developments Ltd has acquired a 408-room hotel in Seoul for KRW 140 billion ($110 million), betting on strong demand driven by international visitors to South Korea.
Singapore’s biggest non-state-controlled developer bought the Nine Tree Premier Hotel Myeongdong II from a REIT managed by a unit of Shinhan Financial Group, CDL said Tuesday in a release. The freehold 17-storey property is within a four-minute walk of Euljiro 3-ga subway station in Myeongdong-Euljiro commercial district.
Executive chairman Kwek Leng Beng said the deal demonstrates CDL’s commitment to South Korea and continued focus on expanding and optimising the company’s hospitality portfolio.
“Our group has over two decades of investment experience in South Korea, having entered the hospitality market with the acquisition of Millennium Hilton Seoul in 1999,” Kwek said. “Since divesting the property and its adjoining land site in February 2022, we have been actively seeking new opportunities to reinvest in Korea.”
Market Forces Favourable
CDL paid KRW 343 million ($260,000) per key for the 2017-vintage Nine Tree Premier Hotel Myeongdong II, which sits near popular shopping spots like Myeongdong Walking Street and the Lotte and Shinsegae department stores.
The SGX-listed firm expects the four-star hotel to benefit from market recovery momentum as Seoul’s room supply pipeline is moderated by the wave of existing hotels being converted to residential or commercial buildings.
CDL pointed to “excellent infrastructure” underpinning South Korea’s tourism economy, led by Incheon International Airport’s expansion to boost passenger capacity by 38 percent to 106 million by next year and make the gateway airport the world’s third largest.
The latest deal marks CDL’s second hotel acquisition of 2023, following the proposed purchase of the five-star Sofitel Brisbane Central from Brookfield Asset Management for A$177.7 million ($119 million). In March, CDL announced the signing of an agreement with Canada’s Brookfield to acquire the 416-key hotel, which would give the Singapore builder its third hospitality asset Down Under.
“These investments are aligned with the group’s strategy to actively drive growth in its global real estate portfolio through continued expansion and diversification,” CDL said.
Seoul-based Shinhan Asset Management had acquired Nine Tree Premier Hotel Myeongdong II from Ssangyong Town Project Financial Investment in 2017 for KRW 130 billion as the basis of Shinhan Nine Tree REIT.
The asset manager put the hotel up for sale in 2021, withdrew it from the market amid fallout from the COVID-19 pandemic, then sought a buyer again as a recent surge in foreign tourists turned the mood around, according to local media.
Sister firm Shinhan Investment sold its Seoul headquarters building last year to a joint venture of private equity giant KKR and South Korea’s IGIS Asset Management for $487 million, mere months after IGIS acquired the Millennium Hilton Seoul from CDL for $912.8 million in a JV with Hyundai E&C.