M&G Real Estate Sells Seoul Office Building to Korea’s Capstone AMC for $151M

M&G Real Estate has completed the sale of the Icon Yeoksam office building in Seoul for KRW 204.3 billion ($151.4 million), with the British asset manager booking a 44 percent appreciation in value on the deal.

The divestment of the 15-storey property in the upmarket Gangnam business district, paired with the recent acquisition of the residential Frontier Shinjuku Tower in Tokyo, illustrates M&G’s dynamic approach to portfolio management and responsiveness to changing market conditions, the London-based investor said Wednesday in a release.

Market sources named South Korea’s Capstone AMC as the buyer of the 19,578 square metre (210,736 square foot) office block, which M&G had acquired from Singaporean property giant CapitaLand in August 2020 for S$165.1 million (now $122.7 million). The latest trade brings M&G’s deal volume in the Korean real estate market to more than KRW 4 trillion ($3 billion) since the firm’s initial investment in 2004.

“The successful transaction of Icon Yeoksam exemplifies the strength of our regional value-add investment approach involving strategic capital deployment and repositioning to realise optimal value,” said Martin Seol, head of targeted strategy at M&G Real Estate Asia. “We are delighted with the returns achieved for our investors and currently reviewing select new opportunities to continue to make new investments in residential, logistics and hospitality sectors in Asia Pacific.”

Bucking Headwinds

An active asset management approach at Icon Yeoksam has led to a 30 percent uplift in rents, which coupled with successful tenant acquisition and retention has culminated in 100 percent occupancy, M&G said.

The firm’s acquisition price works out to more than KRW 10.4 million ($7,733) per square metre of floor area. No income figures were disclosed for the building on Gangnam’s Teheran-ro, located three minutes by foot from Seoul’s Metro Line 2.

“South Korea is a key component of our investment strategy, and we are continuously seeking opportunities for substantial value growth,” said Daniel Cho, M&G’s head of Korea real estate.

M&G’s sale of Icon Yeoksam closed less than two weeks after Blackstone concluded its disposal of Arc Place, an office tower at 142 Teheran-ro to local fund manager Koramco for just over KRW 792 billion. With the two buildings located within a few kilometres of each other, Teheran-ro has now been the site of nearly $740 million in office asset disposals by major global investors since late March.

Ascendas-Singbridge had bought the newly completed project from a joint venture led by a unit of Seoul-based GL Industrial Development for $91.8 million in late 2017, about two years before the Singaporean fund manager was acquired by Temasek-backed CapitaLand.

Despite post-pandemic headwinds in the global office sector, Seoul’s net effective rents rose about 10 percent annually over the last three years, according to JLL research cited by M&G.  During 2023, investors acquired more than $5 billion in income-earning office assets in South Korea, making it the second most active market for desk space in Asia Pacific, behind only Japan, according to figures from MSCI Real Assets.

Investors have also been pursuing South Korean opportunities in sectors beyond office, with rental housing operator and investor Weave Living announcing on Tuesday that a joint venture it recently formed with KKR has acquired its first property in the country. Having picked up a hotel in Seoul for conversion into a 157-unit facility, Weave and KKR say they intend to establish a South Korean portfolio of 1,200 rental homes.

Shinjuku Pickup

The completion of the Icon Yeoksam disposal comes after M&G’s acquisition of the 298-unit Frontier Shinjuku Tower in central Tokyo in January. The transaction for the six-year-old asset was the British firm’s third major purchase of Japanese rental residential assets in recent years, following a 2022 deal with Blackstone and a 2021 buy in Osaka.

M&G Real Estate manages more than $42.3 billion in assets worldwide on behalf of clients.

Capstone AMC had made headlines in 2016 when it acquired the Hewlett Packard Korea building in Seoul’s Yeouidu business district from a fund managed by CBRE Asset Management. The company followed up in 2018 with its sale of the Zalando Campus, an office complex in Berlin, to Hines.

Note: This article updates an earlier version to show Capstone AMC as the buyer. An earlier version had identified EDN Investment Management as the purchaser. Mingtiandi regrets the error.