Korean firms in all-out effort to sell down Paris office buildings

South Korean brokerage firms are stepping up efforts to sell down their remaining equity investments of around 600 billion won ($518 million) in the Paris office market as the year end approaches, emphasizing their locations, long-term tenancies and stable cap rates.

Korean financial services companies, including Mirae Asset Daewoo Co. Ltd. and Hana Financial Investment Co. Ltd., snapped up seven office buildings in Paris and nearby suburbs for a total of 5.6 trillion won this year, emerging as one of the most aggressive buyers in Europe’s commercial real estate market.

At home, however, they are struggling to sell them down because the bulk of the properties flooded the domestic market simultaneously. Further, Korean pension funds and insurance companies, key buyers of sell-down assets, have reduced their appetite for office buildings in Europe, applying stricter standards on the risk of alternative investments.

Mirae Asset Daewoo is aiming to sell down 200 billion won worth of equity interests in Tour Majunga within the year, of the 360 billion won earmarked for domestic investors, according to investment banking sources on Nov. 4.

For the landmark building in France, Mirae also has put 110 billion won of equity investment on the secondary market abroad. It is considering increasing the portion of overseas sales for the property which it acquired for 1.08 trillion won in July.

Hana Financial is in its last-ditch effort to sell down the remaining 30% of 280 billion won equity investment in Tour CBX, located in the heart of the La Defense business district. Its capitalization rate is projected at 4.75% per annum, according to a Hana source.

Samsung Securities Co. Ltd. is reselling 100 billion worth of equity investment in the Crystal Park building in Neuilly-sur-Seine, northwest of Paris.

For Lumiere building, Samsung and Hanwha Investment & Securities have resold most of 350 billion won equity interests to their affiliate companies.

MILITARY FUND INVESTS IN TOUR EUROPE

On Tour Europe which Korea Investment & Securities Co. Ltd. purchased for 370 billion won earlier this year, it has sold down 28.5 billion won of equity investment to the Military Mutual Aid Association, of the 173.5 billion won equity interests. It is seeking to sell down the remaining 35 billion won equity interests.

Meanwhile, NH Investment & Securities and Meritz Securities Co. Ltd. have made little progress in the resale of Tour Eqho, which was the most recent deal among the seven Paris office buildings. They acquired the skyscraper in the La Defense business district for around 750 million euros.

Paris attracted the attention of Korean investors ahead of the 2024 Olympic Games and on the prospect of Europe head offices moving to Paris from London.

Low borrowing costs and euro/won hedging premiums added to the boom in French real estate investment, causing overheated competition between Korean companies.

A Korean rating agency warned in September on the rapid growth of overseas alternative investments by South Korean securities companies and a possible liquidity deterioration from  a resale failure.

By Hyun-il Leehiuneal@hankyung.com



(Photo: Getty Images Bank)