CapitaLand in Exclusive Talks to Buy Gangnam Office Tower From Korea’s NPS for $320M

Seoul continues to stand out as Asia’s hottest market for office properties with Singapore’s CapitaLand Investment now in late stage negotiations for the acquisition of a tower in the Gangnam business district owned by Korea’s NPS for a reported KRW 440.8 billion ($320 million).

CLI is now in exclusive talks for the Golden Tower office building after having been chosen as the preferred bidder for the 21-storey asset by real estate fund manager Koramco, which holds the property on behalf of the world’s second-largest pension fund, according to market sources who spoke with Mingtiandi on Friday.

The Singapore property heavyweight has teamed up with local lender KB Bank for the acquisition, with the partners having signed a memorandum of understanding for the purchase of the Golden Tower on 9 May, according to local news site Seoul Property Insight. A sale and purchase agreement is expected to be concluded soon.

Should the Golden Tower deal be consummated, it would mark the latest in a string of Seoul office deals this year, with investors having scooped up KRW 1.6 billion in desk space in the Korean capital during the first quarter, according to MSCI Real Estate. Analysts point to the city’s tight vacancy and rising rents as a draw for investors.

“Seoul might be one of the few, if not the only major office markets globally to feature low vacancy as well as rising rentals and prices,” Benjamin Chow, head of real estate research for Asia at MSCI, told Mingtiandi on Friday. “The market’s strong fundamentals continue to draw investor interest from a wide variety of capital sources, including domestic institutions, corporates and even non-profit organizations.”

Equal Partners

CLI and KB Bank are said to be acting as 50:50 partners in acquiring the 40,479 square metre (435,712 square foot) property for the equivalent of KRW 10.9 million per square metre, which is around 10 below Koramco’s asking price in a marketing effort last year which failed to result in a sale.

Koramco, which also uses the building at 144-17 Samseong-Dong as its headquarters, is understood to have held discussions with local investment firms Daishin Asset Trust and Mastern Investment Management regarding the Golden Tower, since first putting the asset on the market in July last year at an asking price of KRW 490 billion.

Working with Koramco, the NPS had acquired the Golden Tower from Samwha Development for KRW 252.8 billion in 2008. Koramco undertook renovations of the 1995-vintage property following that deal, with the building also now home to local finance firm CNH Co, in addition to other corporate occupiers.

Mingtiandi reached out to CLI and KB Bank for comment but had not yet received a response by the time of publication. Deloitte is understood to have advised on the transaction.

The deal would boost CLI’s Korean office exposure after the company last year sold the Citibank Centre in Seoul for S$167 million (now $124 million), based on the firm’s recent business update. According to its 2023 annual report, the company’s sole remaining office property in the Korean capital is the 14-storey Jongro Place in Jongno-gu.

For KB Bank, the joint venture sees it once again teaming up with a Singaporean investor for a Seoul office buy, after a fund affiliated with the bank joined with Keppel Land and a fund managed by Keppel Capital to purchase the 15-storey Samhwan Building in Jongno-gu for KRW 220 billion in December 2022.

Work Culture Lifts Office Sector

Defying rising levels of office vacancy globally, Korea’s strong work culture has kept offices filled in Seoul’s primary commercial hubs, ensuring tight vacancy and stable returns for investors, according to Judy Jang, director of research at Colliers in Seoul.

“In contrast to North America and Europe, remote work rates are low in Korea. Among Asian countries, Korean office workers have the highest average office occupancy rate, and the rental market continues to thrive,” Jang told Mingtiandi on Friday.

Colliers data shows average vacancy for grade A offices across Seoul’s three main business districts stood at 2 percent in the first quarter, with Gangnam ranking as the tightest market at 1.5 percent. Grade A office rents across the major business districts averaged KRW 35,303 per square metre per month last quarter, which was up 0.8 percent from the preceding three months.

Jang said that the tight leasing market has attracted investors to secure a slice of Seoul despite an anticipated surge in new supply through 2026.

“Investors continue to show sustained interest in the market. Notably, high-quality, stable assets with adjusted prices are at the center of these transactions. The projected investment volume for 2024 is expected to rise modestly compared to the previous year,” she said.

The Golden Tower is three train stops from Arc Place, a renovated office tower at 142 Teheran-ro, which Koramco purchased from Blackstone in March for KRW 792 billion.

The Teheran-ro strip was a hub for property deals during the quarter, with Hanwha Asset Management selling the T412 tower along the same street in Gangnam for KRW 330 billion, with that deal also happening in March.

During that same month, IGIS Asset Management acquired the Metro Tower in Seoul’s central business district from a fund backed by Tongyang Life Insurance for KRW 415.6 billion.