[Exclusive] AAA-rated tenant; the key is ‘funding’... Namsan Sowol Tower up for sale again [fn Market Watch]

[Financial News] IGIS Asset Management is putting Namsan Sowol Tower (formerly Namsan Green Building), near Seoul Station in Jung District, Seoul, up for sale again. After a deal with Korea Investment Real Estate Trust fell through early this year because of difficulties raising funds, it has restarted the process with the selection of a sales adviser. The building has been renovated and a master lease signed with SK Telecom, but with real estate financing rates higher, attention is focused on whether the deal will go through this time.
According to investment banking (IB) industry sources on the 28th, IGIS Asset Management has begun a competitive bidding process to select a sales adviser for Namsan Sowol Tower, held by the IGIS General Private Real Estate Master Investment Trust No. 18-1. Proposals are being accepted through today, and the adviser is expected to be selected and contracted within December. The selected adviser will oversee the entire process through closing, including proposing a target sale price, reviewing the timing and terms of the sale, operating the data room, and negotiating the sale and purchase agreement.
Namsan Sowol Tower is an office building at 24 Toegyero, Jung District, Seoul, with four basement levels and 20 above-ground floors. The site covers 6,107.1 m2, and the total floor area is 58,668.26 m2. It received approval for use in June 1994 and completed renovations last September.
KKR and IGIS Asset Management jointly acquired the building in April 2023 for approximately 479 billion won. KKR put it up for sale in March last year and named Korea Investment Real Estate Trust as the preferred bidder. The two sides signed a memorandum of understanding (MOU) at about 35.5 million won per 3.3 m2, valuing the deal at around 630 billion won in total, but Korea Investment Real Estate Trust gave up on the acquisition after failing to raise funds from investors. KKR later completed a 505-billion-won refinancing in April this year, arranged by Korea Investment & Securities Co., Ltd.
The seller is highlighting three main strengths. First, the building’s physical environment has been comprehensively improved. Its exterior color was changed and it was rebranded, shedding its image as an aging building. The front section was expanded to create more retail space, while the second- and third-floor parking areas above ground were converted into office space, increasing the exclusive floor area. The lobby, restrooms, and HVAC, electrical, and fire-safety systems were also renovated.
The lease structure is another selling point. SK Telecom, which has an AAA credit rating, signed a master lease for the entire building for five years, from September 2025 through August 2030, and SK Broadband and others occupy the building as subtenants. Cash flow is also strong: annual net operating income (NOI) of at least 32 billion won is generated from the time of acquisition. Based on the previous MOU price of 630 billion won, the capitalization rate is about 5.1%.
Meanwhile, Korea Investment Real Asset Management completed its acquisition of Seoul Square, in front of Seoul Station, for 1.28 trillion won in February this year after the schedule was pushed back twice. According to Cushman & Wakefield, the average vacancy rate for Seoul’s Grade A offices in the third quarter of this year was 5.0%, down 0.8 percentage points from the previous quarter, as the large volume of new supply in the central business district (CBD) in the second quarter is gradually being absorbed.
One concern is that real estate financing rates have risen by about 100 basis points (1 bp = 0.01%) since the start of the year. The master lease, which runs through 2030, also has advantages and disadvantages. Rental income is stable, but it is difficult to raise rents to market levels during the contract term, leaving buyers with less room to increase the asset’s value.
A real estate IB industry source said, “Namsan Sowol Tower is less of a price burden than large assets valued at over 1 trillion won, so it tends to attract a broader pool of potential buyers,” adding, “With interest rates higher, the key to this deal is whether equity investors can be secured.”
[email protected] Kang Gu-gwi Reporter