Singapore’s Keppel REIT Marketing $230M Seoul Office Tower

With Seoul finishing 2023 as one of the world’s strongest office markets, Keppel REIT could be set to cash in the sturdy rents and resilient capital values in the Korean capital, as it markets an office tower in the city’s central business district.

The REIT sponsored by Singapore’s Keppel Ltd has appointed JLL to find a buyer for T Tower, a 28-storey building within a five-minute walk of the city’s primary railway hub, Seoul Station, with the property valued at more than 20 percent above what the trust paid to acquire it in 2019, according to sources familiar with the process.

While office assets have fallen out of vogue in markets like London and Hong Kong, demand for desk space in Seoul has stayed resilient with data from JLL showing average rents for grade A offices in the Korean capital climbing 10 percent year-on-year in the fourth quarter in the face of tight vacancy.

Average values for office buildings in Seoul’s central business district largely held fast last year, dipping just 0.6 percent in the 12 months ending 31 December, according to MSCI Real Assets.

Leased Out and Ready to Trade

Valued at KRW 305.8 billion ($230 million) at the end of 2023, T Tower is on the market after appreciating by 21 percent in value since Keppel REIT paid KRW 253 billion to acquire the building from a fund managed by PGIM Real Estate in May 2019.

Sought for comment, a spokesperson for the REIT’s manager told Mingtiandi that they “continually evaluate ways to optimise the portfolio and recycle capital, and will make the necessary announcements if and when there are material developments.”

The trust currently holds a 99.4 percent stake in the property, with the trust’s sponsor, Keppel Ltd, holding the remaining 0.6 percent interest via its Korea-based unit Keppel Capital Investment Holdings, which is also majority shareholder in the trust’s manager, Keppel REIT Management.

The current market value of the property works out to KRW 1.35 million per square foot of its 227,000 square foot (21,090 square metre) net leasable area.

T Tower’s 95.8 percent occupancy at the end of last year was slightly lower than the 100 percent committed occupancy it had at the start of the year, although it still hosts its three biggest tenants – electronics manufacturer Philips, Korean telecom provider SK Communications, as well as the Korea Medical Dispute Mediation and Arbitration Agency, a public institution.

JLL declined to comment on the marketing effort, which had been reported earlier by Seoul Property Insight.

T Tower’s net property income dipped by 5.3 percent to S$11.5 million ($88.6 million) last year from the year prior due to “tenancy changes and a weaker Korean Won,” the trust’s manager said in its latest financial report.

The asset, located at 30 Sowolro 2-gil in Seoul’s Jung district, accounted for 6 percent of Keppel REIT’s bottom line last year.

Before being acquired by Keppel REIT, the 2010-vintage asset had been held by joint venture between a value-add fund managed by PGIM Real Estate and Korea’s IGIS Asset Management, which had acquired the property partially occupied in 2017 for KRW 184 billion.

Sell High, Buy Low

A successful disposal of T Tower would mark Keppel REIT’s exit from Korea while the trust looks to expand a growing Australian portfolio.

The REIT is currently in exclusive due diligence to buy a 50 percent stake in the 255 George Street office tower in Sydney from a fund managed by Aussie group Mirvac, in a deal that would value the building at around A$700 million ($456 million).

Singapore and Australia account for 95 percent of Keppel REIT’s S$9.2 billion portfolio, with four commercial properties in central Singapore making up 79 percent of the portfolio while its six assets in Australia account for 16.5 percent by value. The Seoul office tower and a boutique office block in Tokyo make up the remaining 5 percent.