PAG buys Seoul office building from POBA-led fund for $270 mn

Asia-based investment firm Pacific Alliance Group (PAG) has bought an office building in southern Seoul from a fund led by the Public Officials Benefit Association (POBA) for around 310 billion won ($273 million), at a time when the growing nuclear threat from North Korea put off global investors from South Korean real estate.

POBA, Samsung Life Insurance Co. Ltd. and other unidentified domestic institutional investors signed an agreement last week to sell the property, POBA Gangnam Tower, to PAG, according to investment banking sources on Oct. 10.

The selling price valued the 20-story building, constructed in 2011, at over 23 million won per 3.3 square meters. It represented the highest unit price for an office building transaction in the southern part of Seoul to date.

From the sale, the group of Korean investors will likely pocket about $50 million in capital gains after five years of investment.

The South Korean institutional investors acquired the 45,000-square-meter building in 2012 through a fund of IGIS Asset Management Co. Ltd. for 256 billion won ($225 million). It houses Korean offices of Qualcomm, GE Healthcare and other foreign companies.

It was named after POBA, a savings fund for South Korea’s local government employees, which is understood as the largest investor in the fund.

It is a major investment made by a foreign investor in South Korean real estate in recent months, with North Korean risks giving big global investors pause on South Korean property deals.

IGIS has been seeking to sell the property on behalf of the South Korean investors since earlier this year.

“PAG focused on growth potential of the areas subway line 7 connects, spanning Gangnam district office and Cheongdam,” one of the sources told the Korean Investors, referring to the wealthy neighborhoods in Seoul.

It is located near a subway station where two lines – 3 and 7 - intersect, and adjacent to public offices such as a tax office as well as multiple foreign company offices.

Despite its good location in an affluent area in Gangnam, or south of the Han River, the land had been known as land of misfortune and had been left idle for more than 10 years after its previous owners, who used the site as a department store, went under in the 1980s and 1990s.

To ward off bad luck by using feng shui, a memorial stone, or “The monument for the God of this land” and a stone lion statue were built outside the building.

The property deal came after POBA committed 70 billion won last year to a 200 billion won private debt fund raised by PAG in South Korea as an anchor investor in the blind-pool fund.

By Daehun Kim

daepun@hankyung.com