BUSINESS

[Sky’s the Limit] Centropolis sets new standard for Seoul’s office building market price

By Bae Hyunjung
  • Published : May 7, 2019 - 15:08
  • Updated : May 8, 2019 - 00:36

The Korea Herald is publishing a series of articles and videos about some of the most expensive and fascinating landmark office buildings in Seoul. -- Ed.

In contrast with the cooling housing sector, the transaction volume for large-sized office buildings here grew at a record pace last year, exceeding the 10 trillion won ($8.8 billion) mark with the uptrend continuing this year.

Among the mega deals was one prime building which accounted for about one-tenth of the city’s total real estate transactions for the year, setting a record price for any single office building deal.

UK-based real estate investor M&G Real Estate in July clinched the purchase of Centropolis, a pair of newly built office towers located right next to Jongak subway station in downtown Seoul.

The transaction, completed in October at 1.12 trillion won ($985 million) and overseen by real estate consultant Savills Korea, officially became the most expensive single building deal in the country’s history.

As the new owner purchased the building through a trust fund along with a pair of local pension fund operators, it was the fund’s trustee KB Kookmin Bank which acted as the legal acquirer in the landmark deal.


(Video shot and edited by Lim Jeong-yeo/The Korea Herald)


The 114 meter-high, 26-floor complex was also ranked the fourth most expensive office building transaction in the Asia-Pacific region last year, making it into the top 10 list along with two other office buildings here, according to industry data analyst Real Capital Analytics.

Previously occupying the site was the Gongpyeong Building, a timeworn office and art gallery building which had been built in 1981 and demolished in 2014 by Centropolis constructor CTCore.

Completed in June last year, the new landmark was deemed one of the most profitable assets in Seoul’s office space leasing market.

But the building hit a rocky patch in finding itself a new owner, due to the volume of the deal and the tight competition among bidders.

In 2017, while construction was still in progress, the builder almost signed a private deal with Qatar Investment Authority, a deal which fell through amid political variables in the Middle East state. Since then, several dozens of bidders demonstrated interest in the selling, signing a non-disclosure agreement and collecting an information memorandum, none of which escalated into an actual transaction.

The consortium of Igis Asset Management and Kohlberg, Kravis, Roberts was tapped as preferred bidder in early 2018, despite rival M&G having suggested a higher bid amount.

But in the end, M&G clinched the deal, as the preferred consortium failed to negotiate the detailed terms of the transaction in the last minute.
 
Centropolis in Jongno, downtown Seoul (Park Hyun-koo/The Korea Herald)

Despite its size and amount, Centropolis may sometimes go unobserved, as it is sandwiched between other landmark skyscrapers in the crowded Jongno downtown district -- such as Jongno Tower and Gran Seoul.

Giving it character is the Gongpyeong Historic Site Museum, a unique and extensive underground space where the city’s biggest historic site from the 16th century is preserved over a gross area of 3,817 square meters.

The underground gallery, which also serves as an annex to Seoul Museum of History, allows visitors a full view of Hanyang -- Seoul’s old name during the Joseon Dynasty.

When the historic remains were dug up at the building’s construction site in 2014-2015, the Cultural Heritage Administration ordered that the entire area be preserved for public interest.

Conforming to the decision, builder CTCore set up an exhibit hall surrounding the historic site and donated the facility to Seoul City. In exchange, it was allowed to build four additional floors than the legal floor area ratio -- a factor which partly contributed to the building’s record market price.

Occupying the building as tenants so far are the nation’s largest mobile carrier SK Telecom and logistics conglomerate Kumho Asiana.

Kumho Asiana, which has made headlines lately with its restructuring brawl of selling off flagship affiliate Asiana Airlines, moved into Centropolis earlier this year in a move to cut down management costs. Its previous headquarters, located in Gwanghwamun, was sold to Deutsche Asset & Wealth Management at 418 billion won.

SK Telecom has recently unveiled its new “5G Smart Office,” a comprehensive working space incorporating its key technology -- including 5G network, artificial intelligence, Internet of Things, augmented reality, and virtual reality.

By Bae Hyun-jung (tellme@heraldcorp.com)
Video by Lim Jeong-yeo (kaylalim@heraldcorp.com)


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