KCGI Alternative Investment Management to Sell 'Centerpoint Seocho' Again—This Time Betting on a Reconstruction Premium [fn Market Watch]

[Financial News] The sale of the office space at Centerpoint Seocho, a large mixed-use facility in Seoul's Gangnam Business District (GBD), is gaining momentum. With expectations for reconstruction growing, how much of a development premium is reflected in the sale price is expected to be the key to closing the deal.
According to investment banking (IB) sources on the 18th, KCGI Alternative Investment Management recently selected RSQUARE as the sales adviser for the Centerpoint Seocho office sale. The asset is held by K Global General Private Real Estate Investment Trust No. 4. The company plans to sign the advisory agreement by the 30th of this month before distributing the investment memorandum (IM) and launching the bidding process.
An IB industry source said, "I understand that RSQUARE's high valuation of the asset, based on the possibility of reconstructing all of Centerpoint Seocho, influenced its selection as the sales adviser. The reconstruction consent rate is also believed to be nearing 80%."
The sale covers office facilities held by KCGI, not the entire building. The assets comprise 11 floors in total, including the 12th and 13th floors and floors 16 through 24. Centerpoint Seocho is a multi-owner building that combines offices, retail space and neighborhood commercial facilities. The individually owned retail facilities are excluded from this sale.
Centerpoint Seocho is a mixed-use building at 304 Hyoryeong-ro in Seocho District, with seven basement levels and 24 above-ground floors. It was formerly Kukje Electronics Center and has a total gross floor area of 107,508 square meters. The building is directly connected to Nambu Bus Terminal Station on Seoul Subway Line 3 and is close to Seocho-daero, Nambu Beltway and Seocho IC.
Mastern Investment Management acquired the office space and convention wedding hall for 91.5 billion won in 2013, then sold them to K REITs & Partners for approximately 130 billion won in 2019. In June 2022, K Global Asset Management acquired the same 11 floors now being offered for sale for approximately 180 billion won. The asset manager changed its name to KCGI Alternative Investment Management the following year.
The core investment thesis from the outset was to increase value through reconstruction. The building is an aging multi-owner property completed in 1997. KCGI holds approximately 30% of the land share, Wonik Group holds about 25%, and the remainder is divided among numerous individual unit owners.
Discussions on reconstruction accelerated as regulatory easing coincided with an agreement among the individual owners. An amendment to the Building Act in 2021 lowered the consent requirement for reconstruction permits for aging multi-owner buildings to 80%. After Wonik Group and many other owners backed the plan, KCGI also began supporting it in 2024. Development plans under consideration included a prime office building and a high-end senior living community.
KCGI also pursued a sale once in 2023. The asset was valued at approximately 240 billion won at the time, but the deal fell through amid sharply rising interest rates and a contraction in the transaction market. In the current sale, the key issue is expected to be the pricing of the "reconstruction option," rather than a simple income-producing office transaction. Because the buyer would acquire only part of the building's individual ownership interests, rather than the entire building, it would also have to take on the development potential and stakeholder-coordination issues arising during the future reconstruction process.
A real estate IB industry source said, "If the price is calculated solely on the basis of current rental income, it may be difficult to bridge the valuation gap between the seller and prospective buyers. Ultimately, the deal's success will depend on how much of the likelihood that reconstruction will become a reality and the increase in value after development can be reflected in the price in advance." The source added, "As the consent rate approaches the threshold, the development premium could grow. However, given the nature of a multi-owner building, the price must also reflect the risks associated with the project timeline and coordinating the interests of the various stakeholders."
[email protected] Kang Gu-gwi Reporter