Korea Investment Corporation to take stake in Melbourne office complex

The South Korean sovereign wealth fund, the Korea Investment Corporation (KIC), is believed to be part of a group acquiring a half stake in a Melbourne office complex for AUD289m (€188m).

The vendor, Dexus Property Group, has given the group an option to take the remaining 50% for the same price – valuing Southgate Complex, on Melbourne’s Southbank, at AUD578m.

Darren Steinberg, Dexus chief executive, told IPE Real Estate: “This was the first tranche of the sale. Over the next few months, we will sell the remaining 50% in a second tranche.

“The investors paid a compelling price, and this gives us the opportunity to deploy the proceeds to fund our development projects.”

Dexus has an AUD2bn development pipeline.

So far this year, it has raised AUD654m from a number of transactions, including the sale of Zenith Centre, on Sydney’s North Shore, to Blackrock and Centuria.

If all incentives are stripped out of the gross rental incomes of Southgate Complex, the yield is in the “low fives”, said Steinberg.

ARA and its partners will require approval from Australia’s Foreign Investment Review Board (FIRB) to close the Southgate transaction.

ARA has been able to finalise the deal with Dexus after securing the backing of two of its funds – the Singapore-listed Suntec REIT and unlisted Peninsula Investment Partners, which manages Korean sovereign funds.

When asked about ARA’s Korean sovereign partner, an industry source told IPE Real Estate: “I can’t confirm it, but it is thought that the Korean partner is KIC. It is not [Korea’s National Pension Scheme].”

A Korean fund manager in Seoul told IPE Real Estate: “There are just two sovereign wealth funds in Korea, so if it is not NPS, then it has to be KIC.”

KIC entered the Australian market in 2012 with an AUD200m investment in a wholesale property fund managed by the Queensland government-owned QIC.

This followed the signing of a memorandum of understanding with QIC, appointing it as one of KIC’s institutional investment managers back in 2009.

KIC joined ARA Asset Management to bid unsuccessfully for Asia Square in Singapore in March.

Owned by a BlackRock fund, Asia Square was sold to the Qatar Investment Authority for SGD3.4bn (€2.3bn).

The Korean sovereign fund manages a portfolio worth close to $92bn (€83bn).

It is implementing a strategy announced in late 2014 to double its exposure to alternative assets, including real estate, to 20% of its funds under management.

In the past year, KIC has partnered Hong Kong-based Gaw Capital Partners to buy the InterContinental Hotel in Hong Kong for $940m.

In January, together with Brookfield Property Partners, it bought the German estate complex of 17 buildings, known as Potsdamer Platz in Berlin, in a €1.3bn deal.

The task of meeting its investment target now falls to Shinwoo Kang, which in June became KIC’s fifth CIO since the corporation’s inception in 2005.

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