Two French offices draw Korean bidders in $1.2 bn deals

  • 2019-02-26

Korea Investment & Securities Co. Ltd. is nearing a 370 billion won ($330 million) deal to buy an office complex near Paris, while a South Korean brokerage consortium is reportedly keen to snap up a skyscraper in the same district in a deal estimated at 1 trillion won ($893 million).

Expectations of stable yields of 7 to 9% per year spurred interest in Tour Europe and Tour Majunga located in La Defense, a business district west of Paris, from South Korean brokerage houses which are diversifying real estate portfolios into northern and eastern Europe, including Ireland and Poland.

For Korea Investment, the upcoming acquisition of Tour Europe will mark its third investment in Europe’s property market since the beginning of the year, following deals in Italy and Denmark.

To close the acquisition of Tour Europe in March, it will raise a total of 170 million won through a promissory note issuance and resale to domestic institutional investors, MoneyToday reorted on Feb. 24.

A Korea Investment source confirmed the report.

A subsidiary of Electricite de France, a French utility, leases the building.

For Tour Majunga, a 45-story skyscraper, a consortium of NH Investment & Securities Co. Ltd. and Hana Financial Investment Co. Ltd. is believed as a front-runner in the auction, MoneyToday said last week.

Alongside the Korean consortium, Mirae Asset Daewoo Co. Ltd. and Korea Investment had submitted letters of intent in the first round of the bidding.

But Korea Investment dropped out of the second round because of intense competition, with Mirae Asset Daewoo taking a cautious stance on the auction, the report added.

Insurer AXA and Deloitte, a consultancy, use the building under long-term leases. A preferred buyer is likely to be named in coming weeks.

“The US and western Europe, which used to be major markets for property investment, surged in value because of competition. So we are taking a conservative approach to them, shifting towards lending from equity investment,” MoneyToday quoted an unnamed brokerage source as saying.

“For equity investments with high expected returns, we are moving to northern and eastern Europe which still have a room for decent capital gains.”

Last week, Korea Investment raised the planned 55 billion won from individual investors to fund the 124-billion-won acquisition of the global R&D center building of tire maker Pirelli in Milan, Italy.

Earlier this year, it poured about 48 billion won in a 210-billion-won deal to acquire an office complex in Copenhagen, Denmark which is used as the headquarters of Novo Nordisk, a global pharmaceutical company. NH Investment also pumped the similar amount into the deal.

The acquisition, sealed by Seoul-based AIP Asset, was the first commercial property investment by a South Korean institution in northern Europe, reportedly targeting annual returns of 8.7% with a three-year investment period.

A pension fund managed by Nordea Group, a Danish financial services firm, sold the property.

By Daehun Kim

daepun@hankyung.com

<Edited by Yeonhee Kim>