Hilton Seoul likely to be transformed into office

Millennium Hilton Seoul, the venue of South Korea's 1997 negotiations to secure a $58 billion rescue package from the International Monetary Fund, will likely be sold to Seoul-based IGIS Asset Management Co. for around 1 trillion won ($900 million) to be redeveloped as office and hotel spaces.

IGIS, the country's largest real estate investment firm, is in the final stages of talks to buy the five-star hotel building from Singapore-listed City Developments Limited (CDL), according to investment banking sources on May 24.

Singapore's sovereign wealth fund GIC and other global institutional investors are considering participating as limited partners in the upcoming transaction that is likely to close later this month.

Hilton Seoul looks set to become the latest in a series of five-star hotels in downtown Seoul that were sold for redevelopment as residential or office buildings since the pandemic-caused travel restrictions took a heavy toll on the hotel industry.

"As a hotel, it does not have a great location compared with other five-star hotels. But given its transportation conditions at the center of Seoul, Hilton will be more valuable as an office building, or high-end residential complex," said a real estate industry source.

The 22-floor hotel has 700 guest rooms with a gross floor area of 82,856 square meters. It sits at the foot of Mount Namsan on the land measuring 18,760 square meters.

Since its opening in 1983, it had been co-managed by the now-defunct Daewoo Group and Hilton International, a US hotel chain, until Daewoo sold the property to CDL for $213.5 million in 1999. 

CDL is part of Hong Leong Financial Group and runs over 100 hotels in 20 countries. It put Hilton Seoul on the market, having suffered a record loss in 2020 due in large part to its soured investment in a Chinese property developer. Hilton Seoul's poor performance in the pandemic situation was also behind its decision to sell the hotel in Korea.

Back in 2008, Kangho AMC, a Korean real estate developer, had signed a preliminary agreement to buy Hilton Seoul for 580 billion won, but backed down after it failed to raise money from investors.

The penthouse on the top floors of 23rd and 24th had been used as the office and residential space for the late Kim Woo-choong who founded and led the bankrupt Daewoo Group. He had used the two floors under a long-term lease until he died in 2019. The penthouse is now used for corporate events or weddings.

GREAT LOCATIONS BUT LOW INVESTMENT RETURNS

Since the pandemic began, a number of hotels in downtown Seoul have changed hands and were undergoing redevelopment or renovation.

Their locations have grabbed the attention of property developers due to a lack of available land to build new houses in the densely populated city, where housing prices have been soaring.

In February this year, the five-star Sheraton Seoul Palace Gangnam Hotel shut down in 40 years and is being transformed into a high-end residential complex.

In January, Le Meridien Seoul in Gangnam District was sold to a consortium led by Hyundai Engineering & Construction Co. for about 700 billion won. It is renovating the five-star hotel into luxury residential and commercial spaces.

Itaewon Crown Hotel in central Seoul was also sold to a Hyundai Engineering-led consortium for an undisclosed sum in December 2020. It will be transformed into a residential complex. 

"Given the lack of available land in downtown Seoul, hotels in good locations but low investment returns are emerging as alternative sites to build houses," said an asset management industry source.

In 2018, IGIS Asset acquired the five-star Renaissance Hotel in Yeoksam-dong, Gangnam District, from Sambu Construction Co. It will reopen as
an office building and a super-luxury hotel, Josun Palace Seoul Gangnam this week. 

Other hotels in Seoul up for sale, or likely to be on the market

Hotel	Location	Status
GLAD Hotel	Gangnam District	Up for sale
Mercure Ambassador Seoul Hongdae	Mapo District	In sale negotiations with Hyundai Asset Management Co.
Aventree Hotel	Jongno District	Samjong KPMG picked as sale manager
Hotel Prima Seoul	Gangnam District	Owner is mulling selling
Hotel Foreheal	Gangnam District	Owner is mulling selling
Tmark Grand Hotel Myeongdong	Jung District	Owner is mulling selling

Write to Chae-yeon Kim, A-young Yoon and Jae-won Park at why29@hankyung.com
Yeonhee Kim edited this article.