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Hyundai E&C to inject $343 mn in Hilton Seoul redevelopment

The construction giant is accelerating its transition into a real estate developer by acquiring five-star hotels

By Jan 11, 2022 (Gmt+09:00)

Millennium Hilton Seoul sits at the foot of Mt. Namsan in downtown Seoul
Millennium Hilton Seoul sits at the foot of Mt. Namsan in downtown Seoul

Hyundai Engineering & Construction Co. (Hyundai E&C), a construction giant under Hyundai Motor Company, will invest 409.9 billion won ($342.7 million) in redeveloping Millennium Hilton Seoul, according to local media.

IGIS Asset Management Co., the largest real estate investment firm in South Korea, signed a memorandum of understanding to buy the hotel from Singapore-listed City Developments Limited (CDL) for 1.1 trillion won in October of 2021 and signed the final contract in December.

IGIS will complete the acquisition within the first quarter of this year and then start the redevelopment. Hyundai E&C’s 409.9 billion won injection includes 9.9 billion won worth of equity investment and the Korean construction giant will take 30% of the development profit, local media platform Money Today first reported. Both IGIS and Hyundai E&C declined to comment on the report.  

IGIS plans to redevelop the hotel property into a mixed-use complex comprising a landmark hotel, office and retail space, with a 260,000-square-meter total floor area by 2027. As the property uses only 350% of the 600% permitted floor area ratio, the redevelopment is expected to take advantage of more floor area and increase profitability.

The construction giant has been active in property acquisition and redevelopment since the current Chief Executive Yoon Young-Joon was appointed as president in December 2020. This aligns with the company’s recent declaration that it would become a "total solution creator" that designs, constructs, develops and manages properties for business diversification. The company stated the plan in its ESG report released last July.

The company has made some huge acquisition deals over the past few years. In December 2020, a consortium of Hyundai E&C, Hana Alternative Asset Investment and Korean real estate developer RBDK Co. was named a preferred bidder to acquire Itaewon Crown Hotel in Seoul from US investment firm Jones Lang LaSalle Inc. The consortium signed the final contract to purchase the property for 250 billion won in December of 2021.

In January of 2021, a Hyundai E&C-led consortium purchased Le Meridien Seoul for 700 billion won. The five-star hotel will be renovated into luxury residential and commercial space. 

Hyundai E&C is expected to grow as a real estate developer backed by its ample liquidity. In its latest financial report, the company’s cash and cashable assets reached 6.9 trillion won including 3.3 trillion of net cash as of end-third quarter of last year. Construction of public buildings, skyscrapers and residential buildings dominated 56% of sales while construction of plants and electricity took 26%. Real estate development, leasing and others accounted for only 6.5% of sales.

Meanwhile, Millennium Hilton Seoul, sitting at the foot of the city's Mt. Namsan for almost 40 years, will operate the business until the end of 2022. The 22-story hotel with 700 guest rooms had been co-managed by the now-defunct Daewoo Group and US hotel chain Hilton International until Daewoo sold the property to CDL for $213.5 million in 1999. 

Write to Market Insight Newsroom at insight@hankyung.com

Jihyun Kim edited this article.
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