Korea Investment and Securities Co. (KIS) took over G Square, a multiple shopping mall, in Pyeongchon, Gyeonggi Province, for 834.1 billion won, in what could be the largest real estate deal so far in the country from GS Retail.
The deal has been getting huge attention in the country, as it is connected with recent moves by the securities firms taking over pricy real estate at home and abroad.
GS Retail, the owner of G Square, named Igis Asset Management as the priority bidder. Igis Asset Management is slated to be the manager for the fund to be formed for the purchase of G Square, although Korea Investment and Securities Co. will be the source of the funds. Its been known that the funds amounting to 370 billion won have been paid to the owner of the mall, GS Retail, and the balance, 464.1 billion won, will be paid with loans from banks later. The final sales contract for the real estate piece will be made around Oct. 31, sources close to the securities firm said.
GS Retail Co., a retail unit of South Korea’s conglomerate GS Group, kicked off the process of selling G Square, its large-scale shopping complex in Pyeongchon Newtown, southwest of Gyeonggi Province, whose sale price is estimated at up to 700 billion won ($615 million).
According to sources from the investment banking (IB) industry on Sept. 4, the retail giant has hired Deloitte Anjin LLC to lead the sale of the mall housing prime offices, Lotte Department Store, a multiplex movie theater and restaurants on a site of 236,688 square meters. As the mall is adjacent to Bumgye subway station and has been rented out to highly credible Lotte Shopping since 2010, it is expected to draw competitive bids. The sale price is estimated between 600 billion won and 700 billion won.
GS Retail initially planned to operate GS Square Department Store after completing the construction of the mega-complex with help from Anyang City.
However, its business started to flounder, so it sold department and discount store operations to Lotte Shopping in 2010. Now the mall hosts Lotte Department Store, Lotte Mart and Lotte Cinema.
The sell-off of the mall would significantly help improve the company’s financial health, which has deteriorated due to an increased debt ratio following its investment in Parnas Hotel last year. Last month, some 10 asset management firms submitted bids for G Square, with Korea Investment Securities and its partner Igis Asset Management getting the nod from the seller.
GS Retail named Korea Investment Securities as the priority bidder, as they met all the conditions to win the bid to take over the commercial structure, including having a number of stakeholders after the takeover is concluded. They’re also ready to guarantee 10 percent of their bid price.
Initially, the owner of the commercial structure wanted to get around 700 billion won for the sale, but the price shot up as a building with a total space of 30,000 sq. meters was included, boosting the total price.
The securities firm no longer plays the role of “middle man” in real estate deals. Now it buys real estate on its own for profit. Korea Investment Securities either resells the property or breaks it up into smaller pieces for resale to individual buyers or institutional investors. Mirae Asset Securities and Merits Integrated Finance & Securities, which is strong in the PFV investment area, are two examples of the securities firms making real estate moves.
NH Investment and Securities Co. is known to have been collecting funds to buy the Park One Project in Yeouido, Seoul, in the name of NH Financial Group.
KIS is ready to sell stakes in G Square, so long as the return from the commercial structure comes in over four to five percent per annum. KIS named Managing Director Kim Seung-hwan, an expert in project financing, to take charge of its IB Group, a positive move to step up its replacement investment sector.
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