Private equity giant KKR is set to enlarge its footprint in South Korea’s real estate market, teaming up with longtime local partner IGIS Asset Management to acquire Shinhan Investment Corporation’s Seoul headquarters for KRW 639.5 billion ($487 million).
Shinhan Investment announced on 18 July that it had signed a contract to sell the 30-storey tower in the capital city’s Yeouido banking district. The division of Shinhan Financial Group had identified the KKR-IGIS consortium as the final bidder for the property in May.
The building provides 70,169 square metres (755,293 square feet) of gross floor area, with the new owners poised to pay more than KRW 9.1 million ($6,942) per square metre for their prize.
Local media reports indicate that KKR and IGIS are acquiring the 30-storey office tower as the first asset to be held by a recently established fund management joint venture targeting value-add real estate investments in the country.
Freeing Up Capital
In its announcement of the deal, which the parties expect to complete this month, Shinhan Investment said the sale of the office building would turn crisis into opportunity by providing the company with cash to develop new business and to increase its earnings from investment banking.
The sale price for the property, which Shinhan acquired through its 2002 takeover of competing brokerage Good Morning Securities in 2002, is 3.6 times the asset’s KRW 180 billion book value, the Korea Economic Daily reported.
Shinhan Investment plans to lease back the 1995-vintage tower after the transaction is completed this month. The firm’s consolidated equity capital as of March stood at more than KRW 5.1 billion, a figure expected to rise to around KRW 5.5 trillion on gains from the sale.
Once Shinhan’s sale of the building in Seoul’s Yeouido financial district is complete, only three of South Korea’s top 10 brokerages will still own their buildings, according to local media reports, with Capstone Asset Management having acquired Yuanta Securities’ headquarters in central Seoul from South Korea’s NH-Amundi Asset Management for KRW 306 billion in a deal which closed earlier this month.
KKR Dives into Korea
KKR’s tie up with IGIS is described as the first joint venture by a Korean real estate investment manager with a foreign firm, with each partner taking a 50 percent stake, according to an account in the Korean Economic Daily.
The New York private equity firm’s relationship with IGIS dates back to at least 2018, when the partners joined with the National Pension Service of Korea to acquire a KRW 2.1 trillion ($1.9 billion) mixed-use project at the site of the former Renaissance Hotel in Seoul’s Gangnam district.
In 2020, KKR and IGIS linked up with local developer SK D&D to acquire the 23-storey Namsan Square office tower in Seoul for a reported KRW 500 billion ($420 million).
KKR representatives had not replied to requests for comment by Mingtiandi by the time of publication, however, the company has a history of doing business with Shinhan Financial. After signing a partnership agreement with the Korean group chaired by Cho Yong-byoung in 2018, the Manhattan-based buyout firm helped its ally raise two tailor-made private funds targeting a combined size of $200 million.
“By raising the customised fund with KKR, we have been able to seize a good opportunity to enhance profitability of our group’s alternative investments,” Cho said in 2020. “In order to improve our group’s capability in global alternative investments to be world-best, we will strengthen our partnership with global asset management companies such as KKR.”
In 2020 Shinhan, along with its compatriots at Hana Bank, provided a combined $63 million in senior loans to finance KKR & Co.’s $5.6 billion acquisition of UK waste management company Viridor, according to a statement by Shinhan on 4 December that year.
Asia Deals Heating Up
KKR has kept busy with Asian deals this year as the firm boosts its presence in the region’s real estate market under the leadership of John Pattar.
In April, KKR completed its acquisition of the Twenty Anson office tower in Singapore’s downtown core, paying Boston-based fund manager AEW just under S$599 million ($441.6 million) for the 20-storey property in the Tanjong Pagar area, according to sources familiar with the transaction who spoke to Mingtiandi. The deal marked KKR’s first office investment in the city-state.
A month earlier, the private equity major had agreed to acquire a Japanese REIT manager held jointly by Mitsubishi Corporation and UBS Asset Management for $2 billion in an all-cash, balance sheet transaction using no client funds.