IGIS Asset Management's controlling stake put on sale

South Korea’s IGIS Asset Management Co., one of the largest real estate firms in Asia, has put the company’s 25% stake plus control premium on the market, banking sources said on Thursday.

The equity for sale includes a 12.4% stake owned by Son Hwa-ja, the firm’s top shareholder and the late founder Kim Dai-young’s wife, and an 11% stake held by IGIS’ Senior Managing Partner Cho Kab-Joo and his private company, according to sources.

The sellers hope for IGIS’ corporate value of 800 billion won ($598.8 million) to 1 trillion won as the company's 100% stake was valued at around 600 billion won last August when Korea's Daishin Financial Group acquired a stake in the real estate firm, raising its holding to 12.3%.

The stake for sale would increase if other key stakeholders exercise their tag-along rights to sell their shares. Among the stakeholders are construction firm Woomi Global Co., which owns 9.08%, real estate investor and builder Kumsungbaekjoe with 8.59%, brokerage firm Hyundai Motor Securities Co. with 6.59% and Korea Real Estate Investment & Trust Co., which holds 5.31%.

It is questionable whether the deal could be signed soon as IGIS, despite its outstanding track record and assets under management (AUM), is struggling with some properties amid a deep slump in the real estate market.

POTENTIAL BUYERS

IGIS was founded in 2010 by the late Kim, a former deputy minister of the Ministry of Land, Infrastructure and Transport. The firm’s cumulative value of AUM is 65.8 trillion won.

As Kim died in 2019, his family members inherited his shares. They decided not to operate the business and sell a controlling stake together with Cho.

The sellers initially considered divesting Cho’s stake first and then Sohn’s, but decided to combine their shares to sell through a public tender to speed up the deal process.  

Some construction firms, global private equity managers and Daishin Financial Group, the second-largest shareholder with 12.3%, show their interest in the deal, market insiders say.

Private equity giant KKR & Co., which was in talks with IGIS last year, withdrew from the deal, sources added.

AGGRESSIVE EXPANSION

IGIS has rapidly expanded its presence through acquisitions of prime offices, retail, logistics centers and houses. It manages 142 properties in Asia, 13 in Europe and 33 in North America.

One of its large-scale projects is the redevelopment of the site where Millennium Hilton Seoul was located. IGIS is planning to build a mixed-use complex comprising a hotel, office and a shopping mall.

IGIS received funds from Korea’s major institutional investors based on the late founder’s networks. In 2018, the firm received commitments from the National Pension Service (NPS) and Korea Post to create a 400 billion won blind pool fund, which had been the largest local real estate fund ever formed.

The firm has ambitiously expanded into real estate development, injecting 14.1 trillion won, or 21% of the value of the cumulative AUM in related businesses.

DECLINING EARNINGS

However, it has seen declining management fees in the downturn of the real estate market. One of its office development projects in Seoul has been suspended as its partner and construction firm Taeyoung Group filed for a debt workout program last December.

Hit by the global commercial real estate market crisis, IGIS saw an 80% loss in Frankfurt-based skyscraper Trianon building last year.

As of the end of last September, IGIS posted 45.5 billion won in cumulative operating profit on a consolidated basis, plunging 73.5% from the year prior. It logged 35 billion won in net profit, down 73.8% on-year.

Some banking sources say that the current market conditions are tough for the sale of IGIS, while others say it is good timing to acquire a leading real estate manager at an attractive valuation.

“IGIS is the only Korean property manager with around 400 real estate investment experts. But there is also concern that the firm needs to pour additional capital into existing assets as the market slump deepens,” an industry source said.

IGIS is yet to confirm the timeline of the sale process, which is under negotiation among its shareholders, the company said.

Write to Jun-Ho Cha and Byeong-Hwa Ryu at chacha@hankyung.com

Jihyun Kim edited this article.