KTCU posts $141 mn return via landmark office exit

The sale of South Korea’s landmark office Alpharium Tower has been completed for 1.02 trillion won ($827.3 million), marking a record-high price per unit area for office deals in Pangyo, so-called Korea's Silicon Valley. Korean Teachers’ Credit Union (KTCU), which invested 110 billion won to become the largest shareholder with a 39.6% stake in the property in 2017, gained 285.3 billion won in cumulative returns including the principal, real estate industry sources said on May 29.

Singapore-based ARA Asset Management’s Korea unit acquired the property from real estate project financing vehicle (PFV) Alphadom City for 527.9 billion won in 2017. KTCU, which invested 110 billion won in ARA Asset’s 277.8 billion won REIT for the deal at the time, has earned 285.3 billion won in aggregate. The earnings comprise the principal, 142.7 billion won in gains on the sale and 32.6 billion won in dividends. The net internal rate of return (IRR) reached 21.9%.

Other Korean investors in the REIT include NongHyup Life Insurance Co., Pine Tree Investment & Management Co. and ARA Asset Management. The exit took place as the five-year period of investment terminated in March.

ARA Asset sold the two buildings, Alpharium Tower I and II, to Seoul-based Mastern Investment Management Co. in January. The sale price reached 9.09 million won per square meter, the highest-ever price per unit in office deals in Pangyo, the tech hub 15 kilometers southeast of Seoul's Gangnam District. The following record is 7.88 million won per square meter in Pangyo H Square, which Korea Real Estate Investment & Trust (KOREIT) purchased for 700 billion won last year.

The two buildings of Alpharium Tower were constructed in November 2015. The buildings have 13 floors above ground and three underground with a combined floor area of 112,254 square meters. Current tenants include Korea’s leading game developer NCSOFT Corp. and information tech services provider Samsung SDS Co., which together use around 80% of the rentable floor area. 

KTCU is proactively investing in landmark offices in Korea. In 2020, the KTCU-led consortium bought a 50% stake in Pangyo Alphadom City’s 6-1 block the Public Officials Benefit Association (POBA)-led consortium for around 1 trillion won. The sale price was 8.2 million won per square meter.

KTCU, a retirement fund for Korean school teachers and employees, manages 41.8 trillion won in assets as of end-2021. It earned an 11.3% return from investment in 2021, the highest return since 2009. Its alternative investments make up 62% of its AUM.

Write to Tae-Ho Lee at thlee@hankyung.com
Jihyun Kim edited this article.