Korea’s Mastern Sells Central Seoul Office Tower to NH REITs for $653M

Mastern Investment Management has completed the sale of a four-year-old office building in Seoul’s central Jongno district to NongHyup REITs for $653 million.

The transaction of D-Tower Donuimun is 2024’s biggest deal closing in the Seoul central business district and second largest overall in South Korea this year, according to Colliers, which represented Mastern on the disposal.

The 26-storey building features 86,268 square metres (928,581 square feet) of gross floor area and finished construction in 2020, making it the third most recently built office property within the CBD, the consultancy said. Tenants include conglomerate DL Group and NongHyup Bank — which, like NH REITs, is a unit of NH Financial Group under South Korea’s National Agricultural Cooperative Federation.

The asset changed hands between the two Seoul-based companies after South Korea saw a 24 percent year-on-year jump in third-quarter deal volume to $6.3 billion as the country’s resilient office segment continued to dominate, according to MSCI.

“D-Tower Donuimun is a rare asset in the CBD of Seoul due to its excellent accessibility, visibility and supreme physical condition,” said Jisang Ahn, director of capital markets and investment services at Colliers Korea. “Not only does the steady cashflow by credible tenants make this asset an attractive investment opportunity, but significant rental growth is expected, either through rental conversion from existing tenants or by attracting new blue-chip tenants.”

Sought-After Landmark

NH REITs emerged as the preferred bidder for D-Tower Donuimun after a sales exercise that drew 20 potential buyers, the Korea Economic Daily reported in June. NH Financial was understood to be a limited partner in the Mastern fund that acquired the building four years ago, as was DL Group construction unit DL E&C.

The tower rises at the intersection of Saemunan and Tongil streets in one of the most sought-after areas of the Seoul CBD, said Colliers, which highlighted the precinct’s strong tenant demand and low vacancy rates.

The $653 million consideration for D-Tower Donuimun ranks second this year among completed Korean transactions, trailing only the $825.8 million trade of The Asset Gangnam in a deal that closed during the third quarter.

NH REITs acquired its CBD trophy at the equivalent of $7,569 per square metre of gross floor area, a 5 percent premium to the $7,200 per square metre indicated by Mastern’s June forward purchase of an under-development office building north of the Han River.

That 11-storey office block is being constructed by AM Plus Asset Development in the Seongsu neighbourhood of Seongdong district. The KRW 310 billion ($220 million) deal is scheduled to close on delivery of the completed project in 2026.

Elsewhere in the South Korean capital, Mastern late last year announced the sale of Centerpoint Gangnam, a nearly completed office building in the namesake district, to local apparel giant F&F for KRW 343.6 billion. The fund manager said it sold the asset before interior construction began, in order to let the future owners implement their own designs.

Momentum Continues

Office yields have expanded 40 basis points in Seoul since the end of 2022, according to MSCI. Colliers noted in a recent report that demand is expected to continue outstripping supply after the Bank of Korea’s October interest rate cut to 3.25 percent boosted investor sentiment.

“Seoul’s office market remains landlord favoured due to limited supply, with transaction volumes gradually rising alongside a stable leasing market,” said Sungwook Cho, managing director and head of capital markets and investment at Colliers Korea.

Deal momentum continued in October, as US fund manager Nuveen Real Estate made its first splash in the red-hot office market with the purchase of the Jeongdong Building in Jung district from a private REIT of IGIS Asset Management for a reported KRW 350 billion.

The same month, Singaporean titan GIC completed the sale of The Exchange Seoul in Jung district to an investor group including South Korea’s National Pension Service and Koramco Asset Management for KRW 247.7 billion.

In September, US developer and fund manager Hines acquired the Seoul headquarters building of Hanssem, a local furniture maker, through a vehicle of Gravity Asset Management in a deal valued at KRW 320 billion.