Office tower near Seoul up for sale for about $900 mn

Alpharium Tower, a landmark office tower in Pangyo Techno Valley near Seoul, will be put on the market later this year, which is expected to fetch the highest-ever price in the South Korean Silicon Valley of around 1 trillion won ($860 million). 

Singapore-based ARA Asset Management Ltd. is now in the process of hiring a sale manager of the two interconnected buildings, according to investment banking sources on Aug. 13.

The 13-story tower, completed in 2015, has nearly doubled in price since ARA's acquisition at 527.9 billion won from its developer Alphadom City PFV in September 2016. ARA had injected 27 billion won into the transaction and beat 10 other bidders.  

At the time, the purchase price equated to about 14 million won per pyeong, or 3.3 square meters, which is now estimated at around 30 million won. Alongside its accessibility to public transportation, the grade A tower serves as a landmark building in the tech cluster in the Seoul Metropolitan Area. 

Earlier this year, another landmark building in the Pangyo Techno Valley, H Square, was sold for 26 million won per pyeong, Korea's base measuring unit for area.

With a gross leasable area of about 1.24 million square meters, the two interconnected buildings are 93% occupied as of the end of June 2021, according to ARA. The asset manager estimated the property's value at 791.8 billion won as of June 2021.

The office tower's anchor tenant is NCSoft Corp., South Korea's top game developer, under a long-term lease until 2031. Other tenants include Samsung C&T Co. and Samsung SDS Co. The retail portion, located on the first underground level and the first and second floors, is leased to Starbucks, Kookmin Bank and other stores.

Pangyo Techno Valley, located in Seongnam City, Gyeonggi Province, is touted as the Silicon Valley of South Korea. It is home to the country's platform giants Naver Corp. and Kakao Corp, as well as e-commerce and IT startups.

Given the 10-year sales restrictions imposed on office buildings in the area since they were completed, property transactions in the technology cluster have remained slow. But its base unit area value, or price per pyeong, has already surpassed that of the Yeouido business district in central Seoul this year.

Armed with fresh money from initial public offerings and pre-IPO share sales, Korean IT companies and startups are looking for spaces for their new hires, driving office prices higher in Pangyo and Gangnam, the country's most upscale district.

But the prospect of interest rate hikes later this year may dent interest in what would be the most expensive building in Pangyo, a one-hour drive from Seoul.

"Unless they plan to use the building as their office and have equity capital enough to afford the high price, the price is too high to bear from the investor's perspective," said an asset management company source. "Now institutional investors, who used to be in their rush to buy at whatever price, are taking a cautious approach, calculating their expected returns." 

Another factor that could weigh on the property is its retail portion, named La STREET, which has been struggling with the pandemic-induced slowdown.

Write to A-young Yoon at youngmoney@hankyung.com
Yeonhee Kim edited this article.