Mirae Asset Global Investments’ $3 billion purchase of the International Finance Center Seoul has fallen apart, with the Korean asset manager now pursuing arbitration against Brookfield Asset Management, the owner of the commercial complex, in an attempt to retrieve a KRW 200 billion ($140 million) deposit.
Korean authorities in August were said to have asked Mirae to reduce the level of debt proposed for financing the acquisition of IFC Seoul, with the seller subsequently cancelling a May purchase agreement for the property that would have ranked as South Korea’s largest real estate deal of 2022.
“The sale of IFC Seoul to Mirae Asset was terminated by Brookfield after Mirae defaulted on its contractual obligations,” a Brookfield spokesperson told Mingtiandi. “The onshore transaction that Brookfield intended to execute would have generated substantial tax revenue for the Korean authorities in line with the value that Brookfield has created since its ownership began in 2016.”
Brookfield is now understood to be retaining the 505,000 square metre (5.4 million square foot) complex for ongoing income. Meanwhile, a miffed Mirae took its case to the Singapore International Arbitration Centre this week in a bid to reclaim its deposit, with the Korean firm said to be considering a damage compensation claim if the body rules in its favour, according to an account in the Korea Economic Daily.
Deal’s Dead End
Situated in the Yeouido business hub, the mixed-use IFC Seoul complex features three high-rise office towers, a three-level retail mall and the five-star Conrad Seoul hotel.
Following the launch of a tender for the property in 2021, Mirae was chosen as the preferred buyer in May after three bidding rounds that pitted the firm against a local consortium of Shinsegae Property and IGIS Asset Management.
In August, South Korea’s Ministry of Land, Infrastructure and Transport dismissed Mirae’s financing plan for the acquisition, rejecting a proposed REIT that would secure KRW 2.1 trillion in loans at 4.2 percent interest and KRW 2 trillion in equity financing while forgoing dividend payments in its first several years of operation.
In 2016, Brookfield had acquired IFC Seoul from AIG Global Real Estate for $2.7 billion after beating out rival Blackstone, with the Toronto-based group reportedly getting financial backing from sovereign wealth fund China Investment Corporation.
Office Investment Market Sours
Judy Jang, associate director of research and advisory services at Colliers Korea, said interest rate hikes have crunched loans and delayed deals in the country by disrupting initial financing plans, with investors now leaning towards increased equity and lower loan-to-value ratios.
“We expect the overall size of prime office investments in Seoul to decrease for the following two reasons: lack of prime assets for investors due to a passive investment environment and rising interest rates in 2022,” Jang told Mingtiandi.