"Steps from Jamsil Station," Yejeon Building Sale Nears Final Stages...Can It Weather Rising Interest Rates? [fnMarketWatch]

[Financial News] Eden Asset Management's sale of the Yejeon Building in Jamsil, Songpa District, Seoul, which it has held through a blind fund, has entered its final stages. More than 20 prospective buyers have toured the property since the seller distributed the investment memorandum (IM), fueling expectations of strong interest. However, prospective buyers appear to be weighing profitability carefully as senior secured loan rates for office properties recently surpassed 5% annually.
According to investment banking (IB) industry sources on the 30th, Colliers Korea, the sale advisor for Yejeon Building, has decided to hold the sale bidding on Oct. 2 for domestic and international institutional investors. More than 20 parties, including real estate asset managers, developers and strategic investors (SIs) with end-user demand, reportedly participated in on-site due diligence ahead of the sale. Last year's sale fell through after HHR Asset Management and Koramco Asset Management failed to complete their acquisitions.
The seller is highlighting the property's value-add potential, or opportunities to increase its asset value. Yejeon Building currently has a floor-area ratio of 616.70% and a building coverage ratio of 41.83%. Located in a general commercial area and a district-unit planning zone—the Jamsil Metropolitan Center District 1—it retains development capacity relative to the permitted floor-area ratio. As an asset more than 30 years old, it offers several options, including value enhancement through remodeling, expansion using the remaining floor-area ratio and even new construction over the medium to long term.
Another selling point is that a strategic investor could directly use space whose leases are set to expire as its corporate headquarters.
However, with rising borrowing costs weighing on office sales, aligning expectations between the seller and prospective buyers is expected to be key to closing the deal. Senior secured loan rates for office properties have recently stood at around 5.1% to 5.3% annually, markedly higher than the roughly 3.8% rate at the end of last year. A trend led by savings banks to reduce the share of real estate lending while increasing corporate lending is also cited as a factor hindering financing.
A real estate IB industry official explained, "With lending rates rising by about 1 percentage point in a short period, higher financing costs are also hurting investment returns from office acquisitions. This is increasing the concerns of prospective buyers seeking upside, or additional profits, through value-add strategies." The official added, "From the perspective of end users, including companies seeking to use the property as their headquarters, this could be an opportunity to acquire a core asset."
Completed in April 1994, Yejeon Building is an office property on Olympic-ro 35da-gil in Songpa District. It comprises five basement levels and 16 floors above ground, with a gross floor area of 19,925 square meters.
The site covers 1,978 square meters, while the building footprint measures 827 square meters. Each typical floor covers approximately 372 pyeong, making it relatively versatile even among medium-sized offices. The property has 150 parking spaces in total, comprising 101 indoor spaces, 38 mechanical spaces and 11 outdoor spaces. It is equipped with five elevators—four passenger elevators and one emergency elevator. The efficiency ratio is approximately 53% for a single-tenant arrangement and 48.83% for a multi-tenant arrangement.
Meanwhile, seller Eden Asset Management formed a blind fund in 2020 after attracting the Government Employees Mutual Aid Association, the Police Mutual Aid Association (PMAA) and Shinsegae Property as major investors. The fund added Yejeon Building to its portfolio along with Yeonsinnae Beomil Building, the Seongsu-dong mixed-use facility development project, Seosomun Jeongan Building and Cheongdam Building. Since last year, Eden Asset Management has been selling its assets in stages as it moves toward winding down the fund.
[email protected] Kang Gwi-gui Reporter