GIC’s Jackpot
The combined value of Gangnam Finance Center and Seoul Finance Center, which are the landmark buildings in southern and northern Seoul, has surpassed 3 trillion won (US$2.66 billion) for the first time. This is largely due to the fact that the vacancy rates have decreased to nearly zero and the market price of large office buildings have recently skyrocketed. Accordingly, the Government of Singapore Investment Corporation (GIC), which bought the two finance centers with Singapore’s sovereign wealth funds in the early 2000s, made paper profits more than twice it had invested even except for dividend income.
According to the Data Analysis, Retrieval and Transfer (DART) system of the Financial Supervisory Service (FSS) on July 17, the fair value of the Gangnam Finance Center stood at 2.11 trillion won (US$1.87 billion) as of end-March this year, up 316 billion won (US$280.19 million), or 16.6 percent, from the same period last year. The fair value of the Seoul Finance Center also increased by 77.3 billion won (US$68.53 million), or 7.45 percent, to 1.12 trillion won (US$990.51 million) over the same period.
The total fair values of the two buildings amounted to 3.22 trillion won (US$2.86 billion), up 13.89 percent from 2.83 trillion won (US$2.51 billion) a year earlier. Samil PricewaterhouseCoopers, which is an external auditor of the two finance centers, came up with the result based on the market approach which calculates the value of property considering the market price of similar buildings. The price for per 3.3 square meters in which fair values are divided by total areas were 29.86 million won (US$26,476) for the Gangnam Finance Center and 28.09 million won (US$24,907) for the Seoul Finance Center. The figures exceeded the highest ever sale price of Samsung Fire & Marine Insurance's head office building in Euljiro, which topped 26.5 million won (US$23,499) per 3.3 square meters.
Located at the intersection of the Yeoksam subway station in southern Seoul, the Gangnam Finance Center is a 206 meters skyscraper which has 45 surface floors and 8 underground ones. The office building's tenants are multinational companies such as Google, eBay, Nike and the Walt Disney Co. Built in 2001, the Seoul Finance Center, which is located near City Hall in Taepyeong-ro, Jung-gu, has 30 surface floors and 8 underground ones. Major foreign lessees include Bank of America, Merrill Lynch and Nomura Securities.
According to Colliers Korea, which provides real estate services, the Gangnam Finance Center had a 1 percent vacancy rate earlier this year, down 5 percent points from 6 percent earlier last year. The decrease in vacancy rates increased the value of the building. An official from a tenant said, “It is hard to relocate an office because it has the symbolism as the landmark and is the place easy to get to, though we have to pay high rents.”
The GIC is very content with the current situation. It bought a 100 percent stake of the Seoul Finance Center from Eugune Tour for 355 billion won (US$315 million) in 2000. It also purchased a 100 percent stake of the Gangnam Finance Center from US private equity firm Lone Star for 930 billion won (US$825.42 million) in 2004. The current value of the two financial centers worth 3.22 trillion won (US$2.86 billion) are 2.5 times higher than 1.26 trillion won (US$1.12 billion) of the initial purchase price.
The GIC has already collected 68.17 percent of its money spent on the acquisition through paid-in capital increase and pay dividend. The Gangnam Finance Center paid 608.8 billion won (US$540.43 million) to the GIC, which owns a 100 percent of the stake, from 2010 to 2016 in the name of paid-in capital increase and pay dividend. The Seoul Finance Center also provided 248.8 billion won (US$220.9 million) worth of paid-in capital increase and pay dividend to the GIC over the same period.