South Korean asset managers are joining hands with French property investment firms to buy prime commercial buildings in the Netherlands and Belgium as they are turning eyes to the Benelux region for higher returns, sending their real estate values to all-time highs.
Seoul-based Koramco Asset Management Co. Ltd. has teamed up with France’s Amundi Real Estate to buy the Atrium office complex in Amsterdam for €500 million ($576 million), in the largest single property transaction in the Netherlands, according to industry sources on July 19.
Separately, a group of Hyundai Investment Management Co. Ltd. and La Francaise, a French real estate investment company, was recently selected as a preferred buyer of a prime office building in Brussels, used as the headquarters of Electrabel GDF Suez SA, an energy company.
The transaction is worth around 500 billion won ($445 million), according to other sources with knowledge of the deal.
The recent property investments in the Benelux region highlight shift in Korean asset owners’ interest toward undervalued assets within Europe, away from competitive markets in core European cities and the US.
In particular, their partnership with Europe’s investment firms may help lower risks of the property deals and thus appeal to a wider range of Korea institutional investors.
“With a flood of money into office buildings in major cities in Europe, their expected returns have turned lower,” a South Korean real estate investment firm source told the Korean Investors. “The Benelux region, as a beneficiary of the Brexit, has room to grow further (in real estate prices).”
To prepare for the Brexit, global financial services firms are opening offices in Luxemburg. Office demand in Brussels is expected to continue to rise as the EU headquarters, said another source, adding: “The real estate markets in the Benelux three countries look really good these days”.
Favorable funding conditions for South Korean investors in won/euro currency swap trades underpinned demand for European assets.
The consortium of Amundi and Koramco is in the final stage of discussing details about the property acquisition in the Netherlands.
Amundi’s blind-pool real estate fund and Koramco Asset will buy equity interests in the property for €100 million each from Icon Real Estate, a fund managed by Victory Advisors. They will borrow the remaining €300 million from local institutions.
Koramco plans to resell its stake in the Amsterdam building to other Korean asset owners, including a brokerage company which is set to make principal investment in the property for an undisclosed amount.
The acquisition comes after Amundi bought an iconic Dutch office building, De Rotterdam, for South Korean investors led by Simone Asset Management Co. Ltd., for €400 million last year. It was then the largest single-asset deal in the Netherlands.
The Atrium office complex on the Amsterdam South Axis was recently renovated and extended with two new office towers to approximately 60,000 square meters, according to Cushman & Wakefield which advised Amundi on the transaction.
Long-term tenants include law firms CMS and Hogan Lovells; hedge fund manager Optiver; and real estate investment company JLL.
For the head office building of Electrabel in Brussels, a subsidiary of France’s power utility firm Engie, Hyundai Investment is to buy 180 billion won worth of equity stakes on behalf of Samsung Securities Co. Ltd.
Its co-investor, La Francaise will acquire about 20 billion won worth of shares in the property, separately. They will finance the rest of the acquisition price with borrowing.
Upon completion of the acquisition in August, Samsung Securities will seek to sell down its 180 billion won equity ownership in the 77,000-square-meter building to other domestic institutional investors.
Hyundai Marine & Fire Insurance Co. Ltd., the parent company of Hyundai Investment, is strongly considering investing in the property, which is expected to generate annual returns of around 7% for the next five years.
Last year Hyundai Investment bought the headquarters building of France’s Natixis in Paris on behalf of Korea Post for 230 billion won, in co-investment with La Francaise.
Meanwhile, NH Investment & Securities Co. Ltd. has withdrawn from negotiations to buy an office building northwest of Paris from the Abu Dhabi Investment Authority (ADIA) for an estimated 900 billion won ($779 million).
Funding concerns and its location, away from Paris’ central commercial districts, led to the termination of the talks, South Korea’s MoneyToday reported in April.
By Daehun Kim
<Edited by Yeonhee Kim>