Hana Financial to buy Japanese retail property for individual resale

Hana Financial Group, the parent company of KEB Hana Bank, will acquire a shopping center building and its surrounding land in a small Japanese city in a deal worth around 50 billion won ($44 million), with a view to reselling part of its equity interests to South Korean retail investors.

Two units of Hana Financial – brokerage firm Hana Financial Investment Co. Ltd. and Hana Life Insurance Co. Ltd. – committed 15 billion won and 8 billion won respectively to fund the deal. They will borrow the remaining 27 billion won from Japanese financial services firms.

Hana is set to complete the payment on Sept. 20.

Hana Financial Investment in turn is selling down its equity interests in the property in Hofu, a city of 120,000 population, in Yamaguchi Prefecture, to high net-worth South Koreans through its branches and private banking centers of affiliate KEB Hana Bank.

Despite the high minimum investment amount of 300 million won per investor, the brokerage company is understood to have attracted individual investors for the transaction.

The retail investors are expected to earn annual returns of the 8% range during the five-year investment period, according to KTB Asset Management Co. Ltd. which manages a real estate fund for the acquisition.

With institutional investors staying cautious about global property investments because of high valuations, South Korean asset managers are trying to attract excess cash from wealthy individuals whose housing investments at home are held back by the new government measures unveiled in early August, aimed at cracking down on speculative demand.

“This product fits into the trend of high net-worth individuals increasing the proportion of indirect real estate investment,” a real estate industry source told the Korean Investors. “With the real estate measures announced on August 2, it is highly likely that global real estate investments will siphon off part of money flooding into the domestic residential market.”

Under the transaction, Hana Financial Group will buy the 42,000-square-meter building of AEON Town shopping center and its surrounding land from a Japanese private equity firm.

AEON Town, part of Japan’s top retailer AEON Group, will continue to use the property under a long-term lease contract.

AEON Town Hofu houses supermarkets, fitness center, language institute and restaurant. It is one of the five top-performing shopping malls among 140-odd AEON Town shopping centers.

KTB Asset arranges the property deal by using its networks with Japan’s Sumitomo Mitsui Trust Bank (SMTB).

A Hana Financial source said that the company will continue to explore Japanese real estate investment products in cooperation with SMTB.

By Daehun Kim

daepun@hankyung.com