Asset management firm Brookfield has made a bid “far higher than market expected” to buy a landmark in central Seoul, IFC Seoul, from the AIG Group, and appears to have been picked as the preferred negotiator, beating Blackstone and other bidders in a deal estimated at more than 3 trillion won ($2.6 billion), industry sources said on July 14.
To finance the purchase that had been previously expected to be worth 2.5 trillion~3 trillion won, Brookfield has tapped local and foreign institutions, and China Investment Corporation (CIC) and the National Pension Service (NPS) of South Korea are likely to invest in the transaction, according to the sources.
“Brookfield placed a far higher bid than competitors and market expected,” one of the sources who handles property investments at a domestic pension fund told the Korea Economic Daily, declining to give further details.
The transaction is set to be the biggest single property deal in South Korea and become the first Korean real estate purchase by Brookfield. In the preliminary bidding, it competed with U.S. private equity firm Blackstone and a Singaporean real estate investment firm Ascendas.
“A high-ranking official of Brookfield recently visited Korea and contacted the AIG side,” said a second source. “CIC, which wanted to invest (in the deal), is likely to participate as an investor.”
It is unclear yet whether CIC and NPS would participate in the acquisition as co-investors or limited partners.
CIC, China’s sovereign wealth fund, has contacted all shortlisted bidders – Brookfield, Blackstone and Ascendas – and expressed its intention to participate in the transaction as a financial investor, regardless of who is selected as the preferential bidder, said the first source at a pension fund. Separately, the NPS had individual meetings with the shortlisted bidders to discuss investment, the Maeil Business Newspaper reported on July 15.
“Brookfield has been preparing to raise funds from institutions at home and abroad, respectively,” Maeil quoted an unnamed source with direct knowledge on the deal as saying. “Not only foreign sovereign wealth funds including CIC, but NPS and other domestic pension funds are highly likely to participate in the deal.”
The International Finance Center in Yeouido, commonly known as IFC Seoul, was a development project of 500,000 square meters that the Seoul metropolitan city government carried out jointly with the AIG Group in order to create a financial hub for Northeast Asia. It consists of IFC Mall, Conrad Seoul Hotel and three office buildings. AIG had shelled out about 1.8 trillion won in the project for the construction and rents, since it took over the development rights in January 2006. If the sale goes through, it is expected to make more than 1 trillion won in profits from the project.
Under the contract signed with Seoul, AIG can put IFC Seoul on the market after 10 years of its ownership. The U.S. financial group has been looking for a buyer of the building since early this year, picking Eastdil Secured as the sale manager.
Separately, Brookfield announced on July 12 that it had closed a $14 billion global infrastructure fund, Brookfield Infrastructure Fund III, that invests in high-quality, core infrastructure assets. It is the largest private fund raised by the asset manager and the largest private infrastructure fund ever raised in the industry. More than 120 institutional investors participated in the fund, of which total capital commitments exceeded the original $10 billion fund-raising target, it said in a press release posted on its website.
By Daehoon Kim
<Edited by Yeonhee Kim>