KKR makes $545m Korea property foray

The New York-based private equity firm has teamed up with a regional hedge fund to acquire K Twin Towers in Seoul’s central business district.

New York-based private equity giant KKR has diversified its property footprint in Asia with the acquisition of K Twin Towers in Seoul’s central business district alongside Hong Kong-based hedge fund LIM Advisors, according to a joint statement.

Financial details of the acquisition was not disclosed, but PERE understands that the total deal size added up to more than $545 million. The seller was a Korean REIT managed by Vestas Investment Management, from which KKR and LIM bought 100 percent of the common equity of the entity which owns the building. Their investment was made on a 50:50 basis.

“We are very pleased to expand our real estate business to the South Korean market and to collaborate with LIM Advisors to acquire one of Seoul’s top commercial buildings,” Bryan Southergill, KKR’s director for real estate in Asia, said in the statement. This is the second market in Asia that KKR's real estate team has entered, after China, according to the firm.

K Twin Towers, completed in 2012, consists of 900,000 square feet of office and retail space. In Seoul’s CBD, the property’s two office towers houses tenants including Hyundai Steel, domestic dairy company Maeil Dairies, and Microsoft Korea.

The towers have had high vacancy rates since their completion, but those have steadily decreased in the past two years as several major tenants relocated, according to market reports. The building is now understood to be approximately 80 percent occupied.

In December, KKR raised its maiden real estate fund with $1.5 billion of commitments, but that fund is focused on North America and Europe. Before that, KKR closed its $6 billion Asia-focused private equity fund in July of last year, the capital of which it is currently deploying. However, it is understood that KKR’s capital for this deal did not come from either of these funds.

KKR is the second private equity firm to invest in the Seoul office market in the space of a month. In May, Hong Kong-based Gaw Capital Partners announced that it is investing approximately $200 million to acquire the twin tower Dongja 8 out of bankruptcy. Depending on regulatory clearances, the deal is expected to close in about six months.

Earlier this year, the State Oil Fund of Azerbaijan (SOFAZ) also made its first foray into the Asian property market with the acquisition of Pine Avenue Tower A in Seoul for $447 million.