PAG has teamed up with Seoul-based Inmark Asset Management to acquire the landmark Grand Hyatt Seoul hotel, as the city’s hospitality sector continues to draw interest from foreign investors.
The Hong Kong-based private equity firm, together with its co-investors, is reported to have paid Hyatt Hotels Corporation around 560 billion Korean won ($480 million) for the 615-room hotel, according to market sources cited by The Korea Herald.
The 615-room hotel will continue to be operated under the Grand Hyatt brand under a long-term management agreement, according to a statement by JLL, which acted as the sole advisor on the sale. PAG representatives had not responded to inquiries from Mingtiandi regarding the transaction before the time of publication.
“This unprecedented opportunity received notable interest from both domestic and international investors, driven by the unique nature of the property, strong market fundamentals and the excellent outlook for Seoul’s hospitality market,” said Corey Hamabata, senior vice president of JLL’s Hotels & Hospitality Group.
The acquisition comes as some $1.1 billion in Seoul hotels have changed hands so far this year, according to JLL, which represents more than three times the annual average volume from 2012 to 2018.
Buying an Iconic Hotel Popular with Royalty
Located in Hannam-dong, one of the wealthiest neighbourhoods in the South Korean capital and popular with heads of state, the iconic hotel occupies a freehold site of more than 73,000 square metres (785,765 square feet).
Renovations of the 1978-vintage property were completed in May, adding a further 14 rooms to the venue, which also boasts 12 restaurants and bars, a spa, and 19 meeting spaces.
The hotel’s presidential suite – which according to hotel publicity was a favourite of Princess Diana and has views of the Han River and Mount Namsan – measures 337 square metres, while the ambassador suite is 200 square metres in size.
The diplomatic suite, which comes with a marble bathroom, is priced on Hyatt’s website at KRW 875,000 per night, while standard double rooms are listed at KRW 261,000 per night.
Prices for the presidential and ambassador suites are only available on request.
Syncing Up with Funds
The move by PAG comes four months after the investment firm started raising capital for a new $2 billion fund – SCREP VII – that aims to invest in high-yielding real estate projects across Asia.
That investment vehicle is in addition to the Hong Kong-based firm’s second core plus / value-add real estate vehicle, PAG Real Estate Partners II, which reached a $1.5 billion first close in February this year.
The Grand Hyatt Seoul acquisition is PAG’s second purchase in Seoul in just over two years, after the fund manager purchased the 20-storey POBA Gangnam Tower in 2017, at a time when North Korea’s nuclear rhetoric had caused some investors to go lukewarm on its neighbour to the south.
PAG bought the 45,000 square metre office project from a fund led by POBA for KRW 310 billion, paying over KRW 23 million per pyeong (3.3 square metres).
Even with the security concerns, that South Korean deal still set a record for the highest price paid per unit of office space in that part of Seoul.
Continuing the Seoul Investment Momentum
Based on the latest Seoul hotel market data, the city will be one of the fastest growing markets in Asia in terms of revenue per available room in 2019, according to JLL’s Hamabata.
“The hotel market outlook remains positive as a result of favourable supply and demand conditions, including healthy domestic demand, strong expected growth in international visitation and limited new supply,” he added.
The PAG-led transaction completed this week comes after a joint venture between Singapore-listed Datapulse Technology and Bizcentre Capital, a unit of Malaysian developer Plenitude Berhad, in April purchased the 224-room Holiday Inn Express Euljiro hotel in Seoul for KRW 59 billion.
In March Datapulse made its own solo Seoul hotel deal, acquiring the 127-room Hotel Aropa for KRW 35 billion.