Korea Investment-led firms to buy EU parliament building for $224 mn

  • 2017-01-10

A consortium of Korea Investment & Securities Co. Ltd. and Hana Asset Management Co. Ltd. are tapping domestic institutional investors to acquire a prime office building in Brussels for €211.9 million ($224 million) which the European Parliament will continue to lease for the next 11 years.

The consortium was selected as the preferred negotiator last November among five shortlisted bidders to buy the property, Square de Meeus 8, from a German REITs company, investment banking sources said on Jan. 8. A total of 16 bidders, including two other unidentified Korean investors, had turned in letters of interest for the building, about 600m southeast of the Parliament’s headquarters.

Hana Asset plans to raise €92 million from Korea Investment and a couple of other domestic institutions through a real estate fund within this month to close the deal. The balance of the acquisition price will be financed through loans.

The Korean asset manager expects the fund, with a five-year maturity, to deliver a 7%-level annual return to investors. Genii Kanam Real Estate Management and Hana Asset will jointly manage the property fund.

The upcoming acquisition underscores growing interest in European real estate. Higher borrowing costs and recent price increases have led to Korean institutional investors shying away from U.S. properties. In particular, after the UK vote in 2016 to leave the European Union, Brussels, France and Germany are emerging as alternatives to Britain’s real estate market.

In early 2016, Korea Investment & Securities and a small-sized domestic asset manager signed an agreement to acquire the Astro Tower in northeast of Brussels for 230 billion won ($191 million).

“With senior mortgage rates moving up in the U.S., European real estate investments are expected to remain buoyant for some time,” said an alternative investment source of a brokerage house in Seoul.

Square de Meeus 8 is located in Leopold district, called the European District because the European functionaries, embassies and global financial services firms occupy office space in the area.

Since the construction of the building in 1978, its entire space has been used by the European Parliament’s subcommittees. The European Parliament had signed a contract to lease the 39,710 square-meter building through 2028. The 11-story office building was remodeled in 1995 and renovated in 2016.

Because of a lack of new office building supply in Brussels, the vacancy rate in the city stays at the level of just 5% and rents in the area are expected to rise further.

“Unlike Paris in France and Frankfurt in Germany which have plenty of investment demand, Brussels in Belgium is attracting the attention as a niche market along with Amsterdam in the Netherlands,” the Maeil Business Newspaper quoted an investment banking source as saying in a report on Jan. 9. “Because the city has stable foundations for growth, it is expected to have substantial room for further growth in real estate prices.”

By Daehun Kim

daepun@hankyung.com

<Edited by Yeonhee Kim>