PGIM to secure $60 mn from Seoul office sale to Keppel

PGIM Inc., the asset management arm of US-based Prudential Financial Inc., is set to pocket about 70 billion won ($60 million) in capital gains from its value-add investment in a Seoul office building which it is selling to Singapore’s Keppel Capital Holdings.

PGIM has recently agreed to sell T Tower in central Seoul to Keppel REIT and Keppel Capital for around 250 billion won, two years after snapping up then the half-empty building, according to real estate industry sources on April 25.

In early 2017, it closed the acquisition of the 28-story tower near the Seoul Railway Station for 184 billion won from Seoul-based Midas Asset Management Co. Ltd.

At the time the purchase price was about 40% lower than those in its vicinity because of its high vacancy rate.

PGIM has cut the vacancy rate by attracting internet service provider SK Communications Co. Ltd. as a new tenant in 2017.

Other key tenants include LG Electronics Inc. and Philips’ Korean unit.

Keppel REIT will own 99.38% of the property, with Keppel Capital taking the remaining 0.62%.

The transaction is expected to close by the end of June.

Projected returns from the property are 4.7% in first investment years and are likely to rise along with annual rent increases, according to a report from the Korea Economic Daily TV last week.

South Korea’s IGIS Asset Management Co. Ltd. had managed the fund investing in the building on behalf of PGIM. Jones Lang LaSalle acted as a sale manager.

VALUE-ADD DEALS

The deal comes two months after Keppel Capital’s Korean arm was picked as the preferred buyer for three Seoul office buildings in a package deal worth an estimated 450 billion won which appeared to be value-add investment.

Singaporean investment companies are emerging as aggressive buyers in Seoul commercial property market. They have scooped up office buildings with high vacancy rates and mid-scale hotels under 200 billion won from domestic asset managers and pension funds.

Singapore-listed Datapulse Technology Ltd. and Bizcentre Capital, a unit of Malaysian property developer Plenitude Berhad, recently acquired Holiday Inn Express Euljiro hotel in Seoul for 59 billion won by forming a 15:85 joint venture.

The seller, the Mutual Aid Military Association, had acquired the 224-room hotel for 52.2 billion won in 2013.

Last December, Datapulse Technology, an optical disc manufacturer, also bought Hotel Aropa in Seoul for 35 billion won.

In 2018, Singapore's Ascendas Hospitality Trust acquired ibis Ambassador Seoul Insadong, a 363-room hotel, for 77.5 billion won and four-star Splaisir Seoul Dongdaemun hotel for 72.1 billion won.

Meanwhile, Singapore’s sovereign wealth fund GIC reportedly agreed last December to invest 60.5 billion won in a 250-billion-won private housing development in northern Seoul, expanding its footprint into South Korea’s residential property market.

By Hyunil Lee

hiuneal@hankyung.com