Denver office buildings draw yield-hungry Korean funds

  • 2018-10-31

A consortium of Hana Financial Investment Co. Ltd. and Hyundai Asset Management Co. Ltd. has recently closed a $238 million acquisition of an office tower in downtown Denver, Colorado, with Samsung SRA Asset Management in talks to buy another skyscraper US Bank Tower in the city, according to industry sources.

The purchase of 1670 Broadway from a UBS Realty Investors LLC came after a consortium of the Construction Workers’ Mutual Aid Association (CWMA) and an unidentified South Korean insurer bought an office building used as Re/Max Plaza International’s headquarters in a 132-billion-won ($115 million) deal in March.

The two property deals in Denver underlined South Korean institutional investors’ effort to diversify into second-tier cities in developed countries or niche markets for higher returns, after valuations of landmark buildings in gateway cities have soared.

1670 Broadway in Denver

1670 Broadway in Denver

To finance the acquisition of 1670 Broadway, Hana Financial committed 120 billion won to a domestic fund launched for the transaction by Hyundai Asset Management.

The brokerage firm is selling down the equity interest in the property to domestic institutional investors.

Additionally, Hana Financial borrowed 100 billion won in a five-year loan at a fixed rate of 4.10% in the United States in September, secured on the 36-story tower, according to South Korea’s Internet media Global Economic News.

Teachers Insurance and Annuity Association (TIAA) occupies 51% of the space on a long-term lease.

The building’s cap rate, or net rental incomes divided by the purchasing price, is mid-5%, according to online news provider edaily in early October.

Meanwhile, Samsung SRA was recently chosen as the preferred buyer of US Bank Tower in central business district of Denver.

It is seeking to acquire the multi-tenant property via a blind-pool fund. No further details of the possible deal were available.

Driven by youth population growth and high average incomes relative to other US cities, property value in Denver is expected to rise further.

Separately, Jack Kim, founder and principal of US-based KORE Investments, recently told the Korean Investors that South Korean investment funds are diversifying away from landmark buildings in big US cities in search of higher returns.

In doing so, they prefer local management firms to global managers so that they can secure high-yielding real estate assets, he noted.

KORE, focusing on assets in Denver and Chicago, arranged the Re/Max Plaza building transaction for the CWMA and the insurance company.

<Edited by Yeonhee Kim>

Photo: Getty Images Bank