JR AMC Co. Ltd., a real estate investment trust in South Korea, has bought an office building in Hungary for the first time in the domestic asset management industry. NH Investment & Securities Co. has also become the first South Korean firm to purchase a large building in Helsinki, Finland. The deal is in its final stage. South Korean financial companies which have been actively investing in Western Europe are expanding their investment scope to Eastern and Norther Europe for high yields.
JR AMC has joined hands with NH Investment & Securities and signed an agreement this month to buy the Nordic Light Trio office building in Budapest, Hungary, for 41 million euros (US$45.68 million or 54.06 billion won), according to investment banking (IB) industry sources on July 29. With a floor space of 14,000 square meters, the building is located in the Vaci Office Corridor, the central business district (CBD) of Budapest, and will be completed in the first half of next year. Ninety-eight percent of the building has already been leased to Roche, a Swiss pharmaceutical company, and others. This is the first time that a South Korean financial firm has acquired an office building in Hungary.
Recently, domestic institutional investors are aggressively investing in office buildings in major cities of Eastern European countries such as Hungary, Poland, the Czech Republic and the Slovakia Republic. Hana Financial Investment Co. has joined hands with Hana Alternative Asset Management Co. to buy Rustonka Business Center in Prague, the Czech Republic, for 163 million euros (US$181.62 million or 214.86 billion won). Before that, the company acquired the entire stake in Main Point Pankrac commercial property in Prague, the Czech Republic, for 130 million euros (US$144.84 million or 171.29 billion won) in cooperation with Koramco Asset Management Co.
Warsaw, the capital and largest city of Poland, is also one of the regions that have been attracting real estate investments from domestic institutions from the beginning of this year. A series of purchases have been made this year after Mastern Investment Management Co., Heungkuk Fire & Marine Insurance Co. and Kiwoom Securities Co. jointly bought a landmark office building in central Warsaw at the end of last year. It was the first purchase of Poland’s commercial property by a South Korean institution. Hana Financial Investment and Mastern Investment Management jointly purchased the head office building of BNP Paribas for 137 million euros (US$152.65 million or 180.43 billion won).
In addition, investment regions are expanding to include Northern Europe. A consortium consisting of NH Investment & Securities and AIP Asset Management Co. has recently been selected as a preferred bidder for the head office of OP Financial Group in Helsinki, Finland. This is the first purchase of Finland’s office building by a South Korean finical service firm. The bidding price was 485 million euros (US$540.41 million or 638.98 billion won) and the contract will be finalized after a due diligence. The building has a total floor space of 74,150 square meters and is leased to OP Financial, the largest financial group in Finland.
One force behind the flurry of investment in Eastern and Norther Europe is a high rate of returns. South Korean institutional investors have been focusing on Western European countries, such as France and the United Kingdom, but the returns on investments decreased to 3 to 4 percent this year due to a hike in real estate prices in the region. On the other hand, investors can expect 7 to 8 percent of returns in Eastern Europe, including some 1 percent of currency rate swap premiums.