Singapore's Keppel REIT snaps up Seoul office for US$221m

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Singapore-listed Keppel REIT has agreed to purchase the T Tower office in Seoul’s CBD from investment manager PGIM Real Estate for KRW 252.6bn (US$221m), the trust’s first deal in the city.

The REIT will take a 99.38% stake in the asset, with a Keppel Capital subsidiary taking over the remaining 0.62%, according to an announcement.

The 28-storey building has 21,182 sq.m. of net lettable space and is just a five-minute walk from the city’s major train station, Seoul station.

T Tower (image: Keppel REIT)

“While Keppel REIT’s portfolio will remain anchored by our prime CBD assets in Singapore, we believe that owning assets across Singapore, Australia and South Korea will enhance our geographical and income diversification, as well as provide greater stability and further opportunities for growth in the long term,” said Keppel REIT Management CEO Paul Tham.

“As Asia’s fourth largest economy, South Korea has enjoyed stable growth over the past few years, with expectations of continued steady economic progress.”

“Its capital, Seoul, has a deep office market with high transaction volumes driven by both strong domestic demand and growing interest from international investors.”

The property is close to other public transport routes, as well as amenities like hotels and the Myeong-dong and Namdaemun retail districts.

The fully-let property is occupied by Philips Korea, LG Electronics, SK Communications and other tenants, predominantly in technology, media and telecommunications, plus manufacturing and distribution and the services sector.

It has a weighted average lease expiry (WALE) of 2.8 years, while the majority of leases have fixed annual rental increases of 3%.

Keppel Capital will work closely with the trust to find further investments in the Seoul office market, noted Keppel Capital CEO Christina Tan.

“Keppel Capital has managed close to S$3 billion of assets with gross floor area of 5.2 million sq.ft. in South Korea since 2004, including CBD commercial offices such as Seoul Square, Jongno Tower, Pacific Tower and Center Place,” she said.

Following the deal, Keppel REIT’s assets under management will grow to S$8.4bn across 10 properties in Singapore, Australia and South Korea.

The deal is expected to be completed in 2Q19.