LaSalle Investment Management has teamed up with a local investor and developer to acquire a commercial site in Seoul for KRW 155 billion ($110 million), as the Korean capital’s office towers continue to be a top draw with investors globally.
A tender for a 2,041 square metre (21,969 square foot) commercial site at 832-21 Yeoksam-dong in Seoul’s Gangnam business district closed on Tuesday, according to the public online auction site OnBid, with the winning bid representing a 33 percent discount from the asset’s appraised value of KRW 230.8 billion.
A market source who spoke with Mingtiandi on Wednesday identified the winning bidder as a joint venture between LaSalle and KT Estate, the property development arm of Korea Telecom, confirming local news reports. The asset was auctioned off by creditors of Aster Development after the troubled local developer failed to pay interest on a KRW 175 billion bridge loan for the project.
The LaSalle-KT Estate purchase is the second major Gangnam office deal to surface in the past week after Mingtiandi reported on 19 May that Singapore’s CapitaLand Investment (CLI) has been selected as the preferred bidder for the Golden Tower on Samseong-Dong.
Distress Downtown
LaSalle and KT Estate are paying the equivalent of KRW 75.9 million per square metre of site area for the project, which comprises five adjacent shovel-ready plots one block from Gangnam Boulevard, a main arterial road in the trendy business district.
Aster, which recently changed its name to Shinyu C&D, reportedly spent KRW 120 billion, or KRW 58.8 million per square metre, to acquire the site in 2021, but had yet to start development as building costs have skyrocketed. Some 21 construction companies went bankrupt in Korea last year, according to government statistics, with authorities have moved to restrict lending to the property sector.
The site was first put on the market in February at a reserve price of KRW 230.8 billion but failed to find a buyer, with three subsequent tenders also falling short. In the fifth round of bidding this week the LaSalle-KT Estate JV bested four other offers to win the project at their one-third discount.
Mingtiandi reached out to LaSalle and KT Estate for comment but had not yet received a response by the time of publication.
Still Up for Office
The Gangnam project marks LaSalle’s latest bet on the Seoul office market after the fund management unit of Jones Lang LaSalle made a high-yield loan to a development project in Seoul’s Seongsu district on behalf of its LaSalle Asia Opportunity VI fund.
The sixth iteration of its closed-ended opportunistic fund series raised $2.2 billion in equity and aims to take advantage of mispriced assets and explore value-add opportunities across key markets in Asia Pacific, including Korea.
The company has also taken on a pair of office projects in Singapore in recent years, including having teamed up with TE Capital Partners to acquire the VisionCrest Commercial building in a deal which closed earlier this year. That S$450 million (then $331 million) Orchard Road project is now under renovation after the two companies had tied up to develop the Solitaire on Cecil office project on a site they acquired near Raffles Place in 2022.
LaSalle’s partner in the Gangnam project, Seoul-based KT Estate, is the real estate investment arm of telecom giant KT Group and had KRW 2.5 billion in assets as of the end of 2022.
Korean Deals Rise
LaSalle and KT Estate picked up their Gangnam site as Seoul’s low vacancy and rising rents make the Korean capital’s office buildings a top target among global investors.
Average vacancy for grade A offices in Gangnam stood at 1.5 percent in the first quarter while prime rents inched up 0.2 percent from the preceding three months, according to Colliers data.
Blackstone’s $593.1 million sale of Arc Place on Seoul’s Teheran-ro to local fund manager Koramco ranked as Asia Pacific’s largest transaction of a single property in the first quarter, according to MSCI Real Assets.
Along the same commercial strip, Hanwha Asset Management in March sold the T412 tower for KRW 330 billion, while IGIS Asset Management acquired the Metro Tower in Seoul’s central business district for KRW 415.6 billion during the same month.
“While there were some concerns over waning foreign appetite and domestic liquidity late last year, Seoul’s office market continues to defy the odds, at least for the time being,” MSCI said in a report published this week.
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