Keppel Group unit set to net $250 mn from value-add deals in Seoul

Alpha Investment Partners, part of Singapore-based Keppel Capital, is set to secure over $250 million from selling two Seoul office buildings for around 1.5 trillion won ($1.3 billion) after filling them with big-name companies such as Starbucks and WeWork.

Once the transactions were completed, Alpha Investment will be able to exit three value-add property investments it has made in Seoul since 2011, while another unit of Keppel is poised to scoop up value-add deals worth an estimated 450 billion won in South Korea.

For one of the exit deals, Alpha has recently named South Korea’s JR AMC Co. Ltd. as the preferred buyer for Jongno Tower, a 33-story landmark building in a central business district north of the Han River, according to sources with knowledge of the matter on March 19.

JR AMC, a real estate investment trust manager, offered around 500 billion won ($442 million) for the 60,000-square-meter property.

The expected proceeds from the planned sale would be about 116 billion won, given that Alpha had paid 384 billion won for the building in April 2016. It had used an investment vehicle run by IGIS Asset Management Co. Ltd. for the acquisition.

Alpha has drawn in Starbucks and Jongno Books, a big and historic bookstore in South Korea, as new tenants. Starbucks opened its biggest South Korean store in the building on the first and second floors, with WeWork, a flexible workspace provider, occupying eight floors.

To win the auction, JR AMC offered a principal investment of 10 billion won in the property. No further details about funding were provided.

Other bidders include KB Asset Management Co. Ltd., part of Kookmin Bank and BNK Asset Management Co. Ltd. of Busan Bank, a provincial lender.

Samjong KPMG, South Korean real estate services provider Genstar and Brookfield Financial are managing the sale.

SEOUL SQUARE

For Seoul Square, a 132,806-square-meter building across Seoul Station, Alpha Investment has recently closed the 970 billion won sale to a consortium of NH Investment & Securities Co. Ltd. and Singapore-based ARA Asset Management Ltd.

It had acquired the property from Morgan Stanley for about 800 billion won in 2011, meaning 170 billion won in proceeds from the exit.

Alpha struggled with high vacancies until it signed a 20-year lease with WeWork in May 2018. The long-term lease lowered the vacancy rate to 3%.

In early 2018, the Singaporean real estate fund manager sold the 23-story Seoul office building, Pacific Tower, for reportedly 430 billion won to a South Korean asset manager, after reducing the vacancy rate to 5% from 50%.

By Daehun Kim

daepun@hankyung.com