KKR and partners are putting Namsan Square back on the market (Image: Google)
With investors rushing to snatch up Korean office properties, a consortium led by US private equity giant KKR is putting a 23-storey tower on the market with the potential to achieve a nearly 60 percent mark-up from their 2020 purchase price.
The KKR-led consortium, which also includes Seoul-based fund manager IGIS Asset Management and developer SK D&D, have appointed CBRE and advisory firm Samjong KPMG to market Namsan Square in Seoul’s central business district, according to a report in Maeil Business News Korea (MK). Industry sources indicate to Mingtiandi that the property could fetch as much as KRW 795 billion ($584 million).
Should the partners succeed in selling the 75,000 square metre (807,293 square foot) tower for that reported value, they would be achieving capital appreciation of nearly KRW 300 billion from their acquisition four years ago, thanks in part to the strong performance of Korea’s office market.
Average rents for grade A office space in Seoul climbed 2.4 percent quarter-on-quarter in the first three months of the year, and were up 9.4 percent from the same period of last year, according to JLL. Investors have reacted by doubling their purchases of income-earning office properties in the Korean capital from a year earlier, picking up KRW 2.8 trillion ($2.1 billion) in deskspace from January through March, per CBRE.
Tender on the Way
KKR and partners had paid KRW 500 billion (then $420 million) to purchase the 1978-vintage building with plans at the time to renovate the ageing structure to boost rents. With average market rents climbing steadily since that time and KKR said to be shifting its strategy in the region, the consortium were reported in 2022 to be bringing the office tower to market.
David Cheong, managing director at KKR
That effort failed to result in a deal, however, with market sources unclear regarding how far any discussions progressed. Investors active in the Seoul market had indicated to Mingtiandi last month that the KKR consortium was inviting property agencies to present proposals for the sale of Namsan Square, with this week’s news confirming those discussions.
The KRW 795 billion value for Namsan Square is equivalent to KRW 10.6 million per square metre, and the mark-up over the 2020 purchase price would be equivalent to $164 million in US dollar terms.
The tender for Namsan Square, which is located at the fringe of Seoul’s central business district at 173 Toegye-ro, is expected to be conducted in July or August, with the building currently home to a mix of local firms, multinationals and government agencies including KRX-listed manufacturer TKG Huchems and the Korea Health Promotion Institute.
KKR declined to comment on the potential sale of the asset. IGIS, SK D&D, CBRE and Samjong KPMG had not responded to inquiries from Mingtiandi by the time of publication.
While the KKR consortium’s planned renovation of Namsan Square never materialised, the property, which had achieved LEED Gold certification for sustainability through earlier enhancements, is estimated by an industry source to have less than 5 percent vacancy.
Partners Back in Action
Located along Toegye Street in Jung district, Namsan Square is about four stops from Seoul Station where KKR acquired the Namsam Green office building from IGIS last year.
KKR and IGIS have been frequent partners in Korea with the US firm earlier this month completing its sale of the Incheon Seoknam Coupang Logistics Center to the Korean player.
In 2022, the two teamed up to buy the 30-storey Shinhan building in Seoul’s Yeouido district from local finance giant Shinhan Investment Corporation for KRW 639.5 billion.
For IGIS, the move to exit Namsan Square comes after the asset manager in March acquired the Metro Tower and Seoullo Tower as part of its plans for a 460,000 square metre complex combining hotel, office and retail space near Seoul Station, according to a report by The Korea Herald.
Seoul has seen a flurry of office deals this year, led by Blackstone’s March sale of the Arc Place in Gangnam to local fund manager Koramco for KRW 792 billion.
That same month, Korea-based Hanwha Asset management agreed to sell the T412 office block on the city’s Teheran-ro commercial strip to local bedding manufacturer Allerman for KRW 330 billion.
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