Star turn for the Star Tower

2001 Lone Star scoops up a prime Seoul office building in the wake of the Asian currency crisis

Following the currency crisis in 1997—and the resulting International Monetary Fund bailout—the South Korean government relaxed its laws regulating foreign ownership of property. Before the bailout, foreigners could not own or invest in the Korean property sector. Afterwards, opportunistic investors began stalking the country for good deals.

Australian bank Macquarie, the property investment arm of the Government of Singapore and investment bank Goldman Sachs have all purchased property in the country since the rules were changed, but one transaction—the purchase of the Star Tower by Forth Worth-based Lone Star Funds—demonstrated the true opportunities available in the real estate markets of post-crisis Asia, as well as the government's desire to lure investors to the country.

In 2001, Lone Star clinched the tower for 620 billion won ($480 million; €379 million), at the time Korea's largest-ever property deal. The 45-story tower, located in the Gangnam business district of Seoul, was the largest office building in the country with more than 211,000 square meters. Called the Star Tower upon completion, the office was distinctive for the large five-pointed star sometimes seen on its upper floors. The acquisition also continued Lone Star's lucrative—if turbulent—relationship with Korea.

How quickly things can change. Lone Star sold the building to the Government of Singapore in 2004 for 900 billion won, approximately 50 percent more than it had paid for the property three years before. But earlier this year, as Lone Star's troubles with Korean tax authorities heated up, the government slapped the firm with a tax bill of 25 billion won for the initial purchase of the tower in 2001. Lone Star plans to appeal the decision, but its golden age investing in Korea may already be long gone.