GIC, M&G Real Estate in $400 mn bid for POBA-owned Korean building

Singapore’s GIC and M&G Real Estate of London-based Prudential Plc. are in the bidding for a new office building in South Korea, wholly owned by the Public Officials Benefit Association (POBA), in a deal that is expected to fetch around 450 billion won ($412 million).

The two bidders have submitted letters of commitment to unidentified South Korean asset managers to commit to real estate funds launched for the auction, according to industry sources with knowledge of the matter on Dec. 5.

The 15-story building is expected to be constructed next March.

Other bidders include Samsung SRA Asset Management Co. Ltd., IGIS Asset Management Co. Ltd., Mirae Asset Management Co. Ltd. and NH-Amundi Asset Management Co. Ltd., a joint venture of NongHyup Financial Group and France’s Amundi Asset Management.

The 87,710-square-meter property is located in Pangyo Techno Valley, the South Korean version of Silicon Valley, home to the country’s up-and-coming IT companies and game developers.

It has secured leases with Hewlett-Packard and other tenants for most of its rentable space.

The government-led development of second and third Pangyo Techno Valley towns and low vacancy rate, an average 4%, around half the levels in Seoul, are behind the strong interest in the building, Alphadom City 6-3.

It is expected to sell at 17 million won per 3.3 square meters, which would be the highest unit price in an office building transaction in that area. It is connected to a transfer station of a subway line and a high-speed rail line, and an up-market department store.

A downside risk is the 2019 lifting of a ban on office building sale in the first Pangyo Techno Valley area which could lead to supply growth, said a real estate market source.

POBA, a retirement savings fund for local government employees, owns 100% of a real estate fund investing in the property. Korea Land & Housing Corporation is in charge of the construction.

GIC is one of a few aggressive global investors in South Korea’s real estate market. The price of two prime office buildings it bought in Seoul - Seoul Finance Center and Gangnam Finance Center - have risen more than twice since their acquisitions in 2000 and 2004, respectively.

By Daehun Kim

daepun@hankyung.com