Korean REIT nets $31 mn from Tokyo property stake sale

JR AMC Co. Ltd., a real estate investment trust manager in South Korea, has recently disposed of its stake in a luxury office building in central Tokyo, securing 3.4 billion yen ($31 million) in proceeds from its first overseas property investment.

The REIT manager had bought a 45% equity interest in Akasaka Star Gate Plaza, a 16-story building with a floor space of 17,493 square meters, for 14.18 billion yen in July 2014.

It was the first commercial property investment in a core business district abroad by a South Korean REIT, betting on an economic rebound in the world’s third-largest economy.

With the five-year REIT expiring in 2019, JR AMC sold the stake for 17.55 billion yen to a Japanese institutional investor, according to investment banking sources on Jan. 10.

The investment yielded an average 7.8% return and an IRR of 13.3%, including the sale proceeds.

The sources declined to provide further details about the majority owner of the building and whether the owner still holds its stake.

Orix Insurance and Tokyo Star Bank occupy most of the office space under long-term lease agreements.

For the investment, JR had raised around 73.6 billion won from South Korean institutional investors, including Korea Scientists and Engineers Mutual-aid Association and Korea Specialty Contractor Financial Cooperative. It borrowed the remainder from a Japanese bank at an interest rate of less than 1%.

At that time, it struggled to attract investors because South Korean institutions had focused on US and European real estates.

JR AMC continued to push into Japan’s commercial properties, acquiring a distribution center and an office building in the Tokyo metropolitan area in 2015 and 2017, respectively.

It also bought an office building in Vienna for 60 million euros in late 2017 on behalf of two South Korean institutional investors.

daepun@hankyung.com