Singapore's GIC sees its Seoul-based properties' values rise

Singapore’s sovereign wealth fund GIC is seeing the two Seoul-based landmarks it owns, Gangnam Finance Center and Seoul Finance Center, bring in huge profits as the office buildings’ book values have soared over the past two decades.   

The fair values of Gangnam Finance Center and Seoul Finance Center as of end-March were 2.34 trillion won ($1.7 billion) and 948.6 billion won, respectively, according to the Financial Supervisory Service’s disclosure on Tuesday.  

The combined fair value of the two properties, 3.29 trillion won, rose 1.4% from end-March 2021.    

Based on calculations by Samil PwC Accountings, an external auditor in South Korea, Gangnam Finance Center’s fair value rose 3.1% from end-March 2021. while Seoul Finance Center’s dropped 2.4%.

Rising vacancy rates in the Central Business District (CBD), including Gwanghwamun where Seoul Finance Center is based, seem to have affected the office building’s value drop.

The average vacancy rate of CBD offices was 5.2% as of end-June, compared with 1.1% of Gangnam Business District (GBD), where Gangnam Finance Center is located, according to real estate services firm Cushman and Wakefield plc.

CBD offices’ average vacancy rate reached 8.6% as of end-2021, compared with GBD offices’ 0.6%, the real estate firm said.     

GIC acquired a 100% stake in Seoul Finance Center from now-defunct Yoojin Tourism for 355 billion won in 2000. The building, founded in 2001 with 30 floors above ground and eight floors underground, has global financial firms including BlackRock and Agricultural Bank of China as tenants.

In 2004, the Singaporean sovereign wealth fund bought 100% of Gangnam Finance Center for 930 billion won from US private equity firm Lone Star.

The office building was also founded in 2001 with 45 floors above ground and eight floors underground with a height of 206 meters. Gangnam Finance Center is rented by many Korean branches of global firms, such as Nike, Google, EUKOR Car Carriers, Walt Disney and British America Tobacco.

The combined value of the two buildings at the time of purchase is 1.26 trillion won, about 38% the current 3.29 trillion won.

GIC has already collected more than 1.53 trillion won from the investment. Between 2010 and 2021, the two buildings brought the sovereign wealth fund more than 1.26 trillion won in cash refunds via capital reduction and dividends. Gangnam Finance Center also paid 270 billion won to GIC last December as a cash refund to the shareholder via capital reduction.

GIC is also poised to invest in another landmark, the International Finance Center in Seoul. The sovereign wealth fund, alongside a Dutch pension fund, is said to be joining a real estate investment trust (REIT) deal that Korea’s Mirae Asset Global Investments Co. plans to complete by end-September. 

Write to Ik-Hwan Kim at lovepen@hankyung.com
Jihyun Kim edited this article.