Korea Post entered the New York real estate market for the first time last month through its purchase of a minority interest in a Manhattan office building for $561 million.
Through a managed account with CBRE Global Investors (GI), the state-owned investor bought a 47 percent stake in 7 West 34th Street, a newly renovated Class A office and retail building. The seller, Vornado Realty Trust, retains the remaining 53 percent interest in the property.
The transaction marks a departure from Korea Post's previous US real estate deals, which occurred in less competitive markets. In October 2013, Korea Post led a consortium of investors in the purchase of 161 N. Clark Street, a 49-story office building in downtown Chicago for $331.3 million, according to real estate data provider Real Capital Analytics. Two years later, Korea Post purchased Midtown I and II, two core Class A office buildings totaling 794,110 square feet in midtown Atlanta for $226.2 million.
“This transaction was unique in that it worked in a gateway market,” said Jeffrey Torto, senior managing director in CBRE GI’s US managed accounts group, in an interview with PERE. “Other gateway markets are challenging because of aggressive pricing and cap rates.” He noted that in the US, Korea Post is focused primarily on core office deals in the country’s top 15 markets and is considering other non-gateway markets such as Dallas, Denver and Seattle.
Pricey US markets have also led Korea Post to look at mezzanine debt financing for tax efficiency and cash yield requirements, Torto told PERE. This cash yield requirement differentiates Korea Post from some of its Asian peers.
“I do find Korean investors are more focused on cash flow, whereas China is more interested in capital appreciation and value investing,” Torto said.