Korea Investment buys US office buildings of eBay and GSK for $260 mn

Jun 03, 2018 (Gmt+09:00)

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Korea Investment & Securities Co. Ltd. has bought a Silicon Valley campus of eBay Inc. for 140 billion won ($130 million), shortly after closing the $130.5 million acquisition of GSK’s Philadelphia headquarters building in early May.

The brokerage unit of Korea Investment Holdings Co. Ltd. will raise funds from domestic investors to finance the deals which are expected to generate 7-8% returns on average, according to recent media reports.

Sources with knowledge of the matters confirmed the reports on June 1.

To finance the $130 million purchase of eBay’s north campus in San Jose, Korea Investment will gather around 56 billion won from domestic investors through a fund vehicle to be managed by Hana Alternative Asset Management Co. Ltd. Sixty-five percent of the acquisition cost will be borrowed.

The payment was completed on June 1, according to the sources.

Completed in 2001, the north San Jose campus consists of four office buildings with a lease space of 23,189 square meters.

It has been leased to eBay through 2029 under the agreement that rents will be raised by 3% a year, and the lease can be extended by up to 15 years after the expiry, MoneyToday said on May 30.

The property is expected to produce an annual average return of 7% after currency hedging for a five-year investment period. Including a profit from the prospective sale, the expected return is likely to rise to 7.8%.

The acquisition followed the purchase of the 19,323-square-meter office building of pharmaceutical giant GlaxoSmithKline (GSK) in May at the Philadelphia Navy Yard.

Korea Investment, with an equity capital of 4.2 trillion won as at end-March, acquired the property from Liberty Property Trust through Korea Investment Management Co. Ltd.

The four-story office building, completed in 2013, is fully leased to GSK through 2028.

It was the second property investment by Korea Investment in Philadelphia. In February 2016, it bought a former post office building in Philadelphia reportedly for $354 million, which is now called Cira Square.

Earlier this year, Korea Investment Management had obtained a 99-year leasehold for €370 million ($454 million) of two buildings in Brussels used as the headquarters of Belgium’s foreign ministry, in the largest property investment by a South Korean investor in the European country. The expected return is around 7%.

By Daehun Kim

daepun@hankyung.com