Ascendas-Singbridge buys mid-sized building in Seoul for $92 mn

Singapore’s Ascendas-Singbridge Group closed the acquisition of a newly-built office building in Seoul for S$124.3 million ($92.3 million) this week, in what appears to be an opportunistic investment.

Ascendas sees long-term potential in the 19,578-square-meter ICON Yeoksam tower, built in October 2017. The building with 15 floors is located in a core business district of Gangnam in Seoul, south of the Han River, and in proximity to two subway lines.

“Their strategy is buying a mid-sized building and finding tenants in a long-term investment for medium-risk/medium-to-higher return,” said a real estate industry source.

To fund the purchase, its unit Ascendas Asset Management Co. Ltd. raised S$39.6 million in a 10-year closed private fund, its fifth office fund in South Korea, according to the company’s statement on Nov. 23. It borrowed the rest.

The success of the strategy may depend on how to attract quality tenants, given that PCA Life Tower just across the building is struggling with high vacancies.

Ascendas has made value-added real estate investments in South Korea for long-term hold. With the new acquisition, it has $600 million in assets under management in the country.

Global investors have been showing interest in small- to medium-sized opportunistic real estate in Seoul, in the absence of major domestic rivals.

Real estate investors such as Angelo, Gordon & Co. believe that they have room to increase the value of new office buildings in Seoul by redeveloping part of them for retail stores, although existing ones in core business districts in the city have an average vacancy rate of around 10%.

A project financing vehicle established by South Korean brokerage companies developed the property after buying in 2015 the land which was used as a parking lot and a repair shop.

The construction cost is estimated at 40 billion to 50 billion won ($37 million to $46 million).

Ascendas-Singbridge Group is jointly owned by two Singapore’s state-owned companies - Temasek Holdings and JTC Corporation- and manages over $15 billion in assets.

By Daehun Kim and Ikhwan Kim

daepun@hankyung.com