KKR consortium poised to buy $1 bn Seoul office tower

Apr 01, 2018 (Gmt+09:00)

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A consortium of KKR & Co. and South Korea’s IGIS Asset Management Co. Ltd. on March 30 was selected as a preferred buyer of twin office towers in Seoul, worth an estimated 1.1 trillion won ($1 billion), which also drew bids from Blackstone Group and the real estate investment arm of London-based Prudential Plc.

The KKR-led group had submitted a bid for Centropolis Towers shortly after the US private equity group exited its first South Korean commercial property investment, K-Twin Tower, for around 710 billion won ($668 million) in December.

The per-unit selling price of K-Twin Tower in Seoul was the highest for an South Korean office building at 28.1 million won per 3.3 square meters, according to real estate industry sources.

For Centropolis Towers, the consortium of KKR and IGIS Asset beat two other shortlisted bidders: M&G Real Estate of Prudential plc. and a consortium of NH Investment & Securities Co. Ltd. and LB Asset Management Co. Ltd.

Other bidders include Seoul-based Mastern Investment Management Co. Ltd. and Millinium Inmark Asset Management Co. Ltd., a joint venture between two Australia-based companies, which teamed up with Korea Post.

The 26-story towers with seven underground levels are slated to be completed in June.

The estimated price tag for Centropolis Towers is at least 26 million won per 3.3 square meters, valuing the 134,310 square-meter property up for sale at around 1.1 trillion won. It is likely to be the single largest property transaction in South Korea.

Due to the proximity to a subway station in the central business district of Seoul, the property may set it apart from other office buildings struggling to fill vacancies.

“There were almost no cases of prime office buildings in the central business district of Seoul failing to find tenants within one year of construction,” said one of the sources.

Seoul office buildings are expected to produce stable rental incomes for annual returns of 5 to 6%.

Rents are expected to rise this year, with steady demand from big business groups, real estate sources said.

Since launching a dedicated real estate platform in 2011, KKR has invested or committed over $5 billion in capital across more than 60 real estate transactions in the US, Europe and Asia as of Sept. 30, 2017.

By Daehun Kim

daepun@hankyung.com