GIC, NPS invest $136 mn each in Korea’s retail complex near Seoul

  • 2016-11-17

The Government of Singapore Investment Corporation (GIC) and the National Pension Service (NPS) have bought equity stakes in a fund launched to buy a landmark shopping complex near Seoul for $136 million each, extending their real estate portfolios into retail properties out of the South Korean capital.

Their investment in G-Square in Anyang, about 20 km south of Seoul, comes as the satellite cities of Seoul have been seeing steady inflows of population from the capital due to soaring housing prices. Vacancy rates in office buildings in downtown Seoul have climbed amid the prolonged economic slowdown.

Long-term lease contract with Lotte Shopping Co. Ltd., a top South Korean retailer, and its location in a core business district of the Anyang city, Gyeonggi Province, also spurred interest in the shopping mall, in the absence of retail complexes as big as G-Square in the neighborhood.

GIC, NPS and a South Korean state-run mortgage lender have committed a total of 412 billion won ($351 million) to the fund set up by IGIS Asset Management Co. Ltd., a South Korean investment firm, to buy the retail property asset from GS Retail Co. Ltd., according to investment banking sources.

The property fund carries a seven-year maturity, which can be extended for another three years. Its equity investors are expected to receive dividend incomes of annualized 6.3% for 10 years, according to a report from online news outlet MoneyToday.

“G-Square, being a dominant and well-located retail mall, is in line with our strategy of acquiring stable, income-generating assets,” GIC quoted its Chief Investment Officer Lee Kok Sun as saying in a statement released on Nov. 14. “As a long-term investor, we remain confident in the continued growth of the Korean economy and its retail sector.”

In August, a consortium of IGIS Asset and Korea Investment & Securities Co. Ltd. was picked as the preferred buyer of the shopping mall in an 834.1 billion won ($710 million) deal, the largest real estate transaction in South Korea so far this year. The deal closed after the consortium completed the payment last week.

The balance of the acquisition price was raised through the sale of senior loans of 422.1 billion won to Samsung Fire & Marine Insurance Co. Ltd., Samsung Life Insurance Co. Ltd., and other domestic institutions.

Built in 2012, the retail complex consists of a commercial tower and an office building, and spans 238,248 square meters. Lotte Shopping leases the complex for its department store, supermarket and cinema chains in a 20-year contract since 2012. The Lotte Department Store in G-Square is one of top-performing branches of the retail group.

GIC was known to have expressed an intention to buy up the whole equity stake in the fund, if there was no other equity investor lined up for the property. NPS had been contacted by Korea Investment & Securities in the early stages of the auction, and began studying the equity investment when the brokerage house participated in the bidding.

The investment followed the GIC’s €2.4 billion acquisition of a European logistics properties developer, P3 Logistic Parks, in the largest European real estate transaction this year. Earlier this year the sovereign wealth fund also had invested about 1 trillion won on aggregate in two distribution centers near Seoul.

GIC has broken into the South Korean property market in the wake of the 1997-98 Asian financial crisis. Its acquisitions include Seoul Finance Center for 355 billion won in 2000 and Gangnam Finance Center for reportedly 900 billion won in 2004. GIC still owns the two finance centers which are known for high rents and low vacancy rates.

Monthly rent for the Gangnam Finance Center was reportedly 108,000 won ($92) per 3.3 square meters as of end-June, 2016, marking the highest for an office building in south of the Han River where a great number of upmarket office buildings are located.

By Daehun Kim and Junghyun Yoon

Daepun@hankyung.com

<Edited by Yeonhee Kim>