By Jane Han
Staff Reporter
Almost 160 billion won ($160 million) in profit after five years, without making or selling anything. This is the ``sweet'' figure Macquarie Central Office, a division of financial firm Macquarie Group, is about to enjoy, once it sells its 22-story Kukdong Building in central Seoul.
The deal is expected to be the biggest transaction in the local office market to be sealed in the second half of this year.
Having purchased the landmark tower in the city's theater district in 2003 for 158 billion won, Macquarie is currently seeing a selling price estimated at 400 billion won.
``This is just one of the many big deals that we'll soon start seeing more of,'' said Kim Tae-ho, a senior analyst at R2Korea, a Seoul-based real estate consultancy. ``Property owners will either wait until the price goes up more or sell now and enter again.''
According to market data, office building prices have more than doubled over the past three years, which drew investors from both inside and outside the country. Foreigners as of date own about one in 10 commercial properties in the capital, most of which was purchased in the early 2000s.
Seoul's office market has recorded constant uphill growth since then, with a general shortage in professionally maintained commercial property and a vacancy rate of less than 1 percent.
Domestic funds, such as the National Pension Fund, have recently gained more stakes in commercial buildings, but still many of the well-known establishments in Seoul's cityscape are owned and operated by foreign capital.
``Foreigners have a better idea of how to operate a professional commercial tower, so the past couple of years helped to expand the horizon for local businesses,'' said Kim, ``and they also made some good money.''
The Government of Singapore Investment Corp. (GIC)-owned Seoul Finance Center (SFC) and Gangnam Finance Center (GFC) are among the most famous for its high-profile tenants and luxurious outlook.
According to the latest figures, the 30-story SFC in downtown Seoul is currently valued at well above 1 trillion won, which is almost triple the purchase price in 2000. And the 45-story GFC in southern Seoul is estimated to be even higher. This is the former Star Tower Building that stirred up the so-called buy and run controversy surrounding Lone Star.
Is the Singaporean state-run fund about to sell these units anytime soon? Industry sources say no, because the office tower still has ways to go up over the next three years.
``The space shortage will last until after 2011, so we expect prices to go even more until then,'' said Lee Joo-yong, an analyst of JUSTR, a real estate investment consultant.
Deutsche Asset Management Group, Merrill Lynch and Morgan Stanley are also lucrative non-domestic property owners.