Hanwha Investment buys Prague office complex for $286 mn

Hanwha Investment & Securities Co. Ltd. has acquired a five-building office complex in Prague for 325 billion won ($286 million), as South Korean institutional investors are increasingly looking to Eastern Europe for undervalued assets.

The brokerage arm of South Korea’s Hanwha Group recently closed the acquisition of Prague Waltrovka from Penta Real Estate, which is expected to generate annual returns of between 8% and 9%, according to media reports.

A source with knowledge of the matter confirmed it on April 1.

For the transaction, Hanwha Investment put 130 billion won in a vehicle of Seoul-based LB Asset Management Co. Ltd. and borrowed the remainder.

It is now selling down the equity interest to domestic institutional investors.

Completed between 2015 and 2018, the five buildings span 80,000 square meters. They are located in Prague 5, one of the largest municipal districts of the capital city of Czech Republic.

Anchor tenants include Johnson & Johnson, Oracle Corp., and Schneider Electric SE, with an average vacancy rate of 4%.

GLL Real Estate Partners, a unit of Macquarie Group, will manage the property on behalf of Hanwha Investment.

Steady economic growth and low unemployment rate are luring South Korean investors into the office markets of Czech Republic and Poland, given their geographic positions as members of the European Union.

Earlier this year, a consortium led by Hana Financial Investment Co. Ltd. and Hana Alternative Asset Management Co. Ltd. was chosen as the preferred buyer for Rustonka Business Center in Prague, which is valued at around 210 billion won.

Last year, Shinhan Investment Corp., a brokerage arm of South Korea’s leading banking group, has bought a KPMG-leased office building in central Prague for 65 billion won, marking the first property acquisition in the Czech Republic by a South Korean financial institution.

LB Asset, founded in 2016, had sourced the deal of acquiring a building used as Facebook Inc.’s second Dublin office for around 150 billion won and the acquisition of two logistics centers in Britain by South Korean brokerage companies for around 270 billion won.

By Daehun Kim

daepun@hankyung.com

(Updated on April 2, 2019 to add the amount of equity investment.)