Gaw Capital Partners has made its first investment in the Korean market with the approximately $200 million purchase of a mixed-use property in downtown Seoul.
The Hong Kong-based private equity real estate firm has acquired the twin tower Dongja 8 out of bankruptcy.
The deal is understood to involve a number of creditors and third parties, as the original contractor for the building’s construction fell into bankruptcy and had to undergo a restructuring process in Korea. The deal is not expected to fully close for another six months, although the firm has been working on it for about a year now.
The capital for the deal will come from the firm’s $1 billion Gateway Fund IV, which after it closes should be about 55 percent invested. At this point, there are no co-investors in the deal, but the firm said they could be brought on board after the deal closes.
It comes quick on the heels of its first investment in Japan. The firm last month acquired the Hyatt Regency Osaka in Nanko bayside area of Osaka City for only $30 million. Gaw Capital will have deployed approximately half of its non-greater China allocation with this second ex-China deal.
Gaw Capital is acquiring 75 percent of the total floor area. It has purchased the office, retail and residential portions of the 985,000 square foot structure. The remaining 25 percent of Dongja 8 is a hotel, which will be operated separately by another firm that bought it before Gaw Capital’s negotiations.
“We are excited about our first acquisition in Korea, which is a market we have been eyeing for years,” Gaw said. “This is a unique opportunity to acquire a property in such a bustling and convenient area of Seoul – and one with such high growth potential.”
The building is still under construction, but is scheduled for completion in the fourth quarter. It is located close to Seoul Station and in a neighborhood undergoing significant city redevelopment plans. Despite its location, Gaw Capital is still expected to do most of the pre-leasing work for Dongja 8.
“Korea is a market that’s been ignored by all the big real estate investment houses,” Gaw told PERE. He said his firm was filling a “vacuum” left by large US investment managers Lone Star and Morgan Stanley Real Estate Investing which had previously been active investors in the country but currently have less of a presence.
Gaw said of Seoul: “I think the face of the city will over time come to match its cultural prominence, and I think we’re in the first year of that three- to four-year cycle.”
Gaw Capital’s investment comes quickly after the State Oil Fund of Azerbaijan (SOFAZ) made its first foray into the Asian property market with the acquisition of Pine Avenue Tower A in Seoul for $447 million, demonstrating how the city’s attractiveness to international investors is gathering momentum.
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