KKR, NPS to invest $700 mn in $1.9 bn Seoul real estate project

Private equity firm KKR & Co and South Korea’s National Pension Service (NPS) will make an equity investment of 800 billion won ($704 million) in a mixed-use real estate project in Seoul which the country’s largest real estate investment firm recently acquired for 2.1 trillion ($1.9 billion).

Seoul-based IGIS Asset Management Co. Ltd. closed on the purchase on Oct. 8 of the development project from a consortium led by a domestic engineering firm.

Under the project, two buildings with a height of 35 and 37 floors each will be built  in southern Seoul by early 2020.

To fund the purchase, IGIS launched an investment vehicle to raise 300 billion won in common shares from KKR and 500 billion won in preferred shares from NPS, according to sources with knowledge of the matter.

The previous owner of the project had raised 1.35 trillion won in project finance loans to fund the property purchase and its redevelopment.

The IGIS-led consortium will convert most of the project loans into secured debts.

KKR announced the property transaction on Oct. 9 which marked its third real estate investment in South Korea.

It said that the investment was being funded from KKR Asian Fund III which closed on $9.3 billion in June 2017, but gave no additional financial terms.

The property will consist of office and retail space and a five-star hotel, with a gross floor area of 239,188 square meters and net leasable area of 121,707 square meters.

A 20-year lease agreement for the 263-room hotel has been signed with Shinsegae Chosun, a leading hotel operator and a unit of South Korea’s top retailer, according to KKR.

In 2014, KKR invested in The-K Twin Towers, a prime office complex located in Seoul’s central business district. It sold the property to Samsung SRA in January 2018 at 28.1 million won per 3.3 square meters, then the highest per-unit price for a South Korean office building transaction.

By Daehun Kim

daepun@hankyung.com