ADIA seeks to exit Seoul office building as new supply fuels competition

Aug 15, 2018 (Gmt+09:00)

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Abu Dhabi Investment Authority (ADIA) will put a 14-story office building in Seoul up for sale, in a deal expected to fetch between 550 billion and 600 billion won ($487 million-$531 million), slightly above what it had paid three and a half years earlier.

The planned exit comes as one of major tenants Shin & Kim, a big South Korean law firm, is moving out early next year, with new office supply tipping the balance of power towards tenants.

The prospect of interest rate hikes by the Bank of Korea later this year also prompted the sovereign wealth fund to place the building on the block.

ADIA has recently received proposals from real estate consultancies to sell State Tower Namsan which has a floor space of 67,000 square meters, according to real estate industry sources last week.

State Tower Namsan to be up for sale by ADIA

It bought the property for 503 billion won from BNP Paribas Asset Management Co. Ltd, or 25 million won per 3.3 square meters, in early 2015.

The building is expected to sell for 27 million to 28 million won per 3.3 square meters, bringing up to 568 billion won in total, the sources said.

Shin & Kim, which has occupied about one third of the office space since 2013, decided to move to Gwanghwamun D Tower by next March, after ADIA reportedly demanded a sharp rent rise.

The law firm originally planned to move to Centropolis Towers, completed earlier this year, which a consortium led by M&G Real Estate of London-based Prudential Plc. recently bought for around 1.1 trillion won in the single biggest property transaction in South Korea on record.

But it finally chose Gwanghwamun D Tower, a 10-minute drive from its current location, which offered a five-month rent-free period every year, according to edaily, a news outlet.

In the tenant-led market, the developer of Centropolis Towers agreed to take responsibility for finding tenants as a condition of the sale to the M&G-led consortium, according to the edaily report in July.

“The building is in a good condition and has a good mix of tenants. As long as it finds a new tenant that replaces Shin & Kim, it will be able to yield high returns,” said one of the sources.

Other tenants of State Tower Namsan include BNP Paribas’s Seoul branch, BNP Paribas Securities Services, consulting firm Bain & Co, Korea Investment Corp. and BMW Korea.

By Daehun Kim

daepun@hankyung.com