On 6 March, Japanese private equity fund Vana World was reported to have signed a preliminary agreement to invest $3 billion into a free economic zone west of Seoul.
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The deal, which was brought to light by Korea's Yonhap News Agency, was immediately championed on the websites of the Korean inward investment agency, Invest Korea, and the state-run Korea Trade-Investment Promotion Agency (KOTRA), the latter of which was also reported to be the vendor.
Details of the transaction have been thin on the ground. Vana World has reportedly agreed to invest $3 billion into Songdo International City in Incheon, as part of a government-sponsored free economic zone, with plans for a complex housing research institutes, hospitals and educational facilities.
However, the transaction – if it materialises – would be the single biggest Japanese investment in Korea and represent more than twice the total amount of Japanese foreign direct investment during the whole of 2008.
How the deal will be structured and who, and what, is Vana World is not entirely clear. When PERE approached KOTRA, the government agency was repeatedly unavailable to comment and there was little trace of Vana World, or its chairman Sato Yosuke, who reportedly penned the agreement with Cho Hwan-eik, KOTRA's president.
Enquiries in Japan also met with silence, with one prominent GP admitting to having personally searched for Vana World himself without success.
Whether or not this deal completes, there is plenty of evidence to suggest that cross-border investment between Japan and the neighbour it governed from 1910 until the end of World War II is on the rise. As consumer spending by Japanese tourists in Korean shops is evidently increasing, it is predicted that real estate bargains sought by opportunistic Japanese investors will follow.
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Attracted by the cheap Korean Won (which has fallen in value against the Yen by as much as 80 percent), the Japanese have flocked into Korean shops. According to the Korea Tourism Organisation, almost 250,000 Japanese tourists boarded planes for Korea, up 55 percent on a year ago. A pan-Asian fascination with Korean culture, called the “Korean Wave”, is part of what draws Japanese tourists to the country.
And real estate in Korea is appearing cheaper too particularly in the residential sector. In January, Posco Engineering and Construction said it would sell its Songdo International City apartments at 2005 prices, representing a discount of approximately KRW1 million (€544; $678) per 35.5 square feet. The going rate for that amount of space at the development is now between KRW14 million and KRW15 million.
For sure, Korean officials are keen to drum up news flow about Japan's interest in their real estate. Just six days after the report about Vana World's investment, Invest Korea posted another story on the subject.
On 12 March, the equally inconspicuous Japanese company Human Harmony & International Partners Japan, reportedly signed a memorandum of understanding with KOTRA to invest $1 billion in Korean property or stocks. The partners are understood to be forming a fund for the investment but, once again, further information was thin on the ground.
Whether the $3 billion of real estate investments reported last month happens or not, it seems the Koreans are at least putting their real estate in the shop window for the benefit of their former rulers.
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