[Edaily Marketin, Reporter JI YEONG-EUI ] Amid controversy over the fairness of the sale process for “Timework Myeongdong,” valued at 500 billion won, a tense standoff has emerged between Aegis Asset Management’s assertion of “transaction stability” and competing bidders’ claims of “double standards.” The key issue has become whether Aegis, the seller, strictly factored in the operational uncertainties of competing bidders while applying relatively lenient standards to its own consortium.

According to a comprehensive review by E-Daily on the 19th, based on its reporting and input from the investment banking (IB) industry, the key issues surrounding the fairness of the evaluation for the preferred bidder for Timework Myeongdong are, broadly speaking, three: △ the consistency of evaluation criteria for price and schedule; △ the risk of operational fluctuations at the existing tenant hotel; and △ the appropriateness of the qualitative assessment of risks related to vacating the premises, performance bonds, and share deals.

Controversy Over Evaluation Consistency Regarding the Inclusion of “Interview Content” After the Bid

The first point of contention concerns

the criteria used to

evaluate price and transaction closing conditions. Based on the initial proposals submitted on the 23rd of last month, Aegis conducted a quantitative evaluation of Goldman Sachs’ bid of 535 billion won and the Blue Cove Consortium’s bid of 530 billion won. Blue Cove had specified “530 billion won + α” in its proposal at the time, and when Aegis asked about the size of “α” during an official interview on the 29th of the same month, Blue Cove replied that it was between 7 billion and 8 billion won. Adding this amount brings Blue Cove’s proposed price to between 537 billion and 538 billion won—up to 3 billion won higher than Goldman’s.

However, Aegis did not incorporate the figure mentioned in the interview into its quantitative evaluation. The company explained that it had a policy against engaging in so-called “bidding wars”—where prices are continuously raised after the bid deadline—and that acknowledging the specific amount disclosed in the interview would effectively amount to a rebid. They further explained that only the bid price stated in the initial bid submission document was used in calculating the internal rate of return (IRR) and investment multiples.

In contrast, the Blue Cove Consortium counters that it explicitly stated “+α” in its initial proposal and that the seller, Aegis, merely asked for the specific amount during an official interview and provided a specific range. They maintain that there was no prior guidance—either in the Request for Proposal (RFP) or from the lead underwriter—stating that the “α” could not be specified during the interview.

However, doubts remain regarding the consistency of the evaluation criteria, particularly regarding the interview with Goldman Sachs that took place on the same day after the Blue Cove Consortium’s interview had concluded. During the interview, Goldman Sachs stated that it could bring forward the transaction closing date compared to the timeline outlined in its initial proposal. This raises the question of whether the same evaluation criteria were applied, given that Blue Cove’s submission of an additional price was excluded as a “post-submission proposal,” while Goldman Sachs’ proposal to shorten the timeline—presented after the bidding deadline—was considered a positive factor.

In response, Aegis clarified that Goldman Sachs’ proposal to shorten the timeline did not influence the quantitative evaluation score. They maintained that, based solely on the base prices in the proposals at the time of the bid deadline (535 billion won vs. 530 billion won), Goldman Sachs was already ahead in terms of IRR and investment multiples, so the shortened timeline was merely a secondary “upside” factor.

Aegis: “150 billion won in damages if hotel contract is breached” vs. Blue Cove: “Risk overestimated”

The risk associated with negotiations with Accor, the hotel operator currently occupying Timework Myeongdong, is also a point of contention. It was determined that both the Blue Cove and Goldman Sachs consortia would have needed to hold additional discussions with the hotel operator to change future hotel operating plans.

Aegis determined that if Blue Cove were to switch from a master lease arrangement to a managed operation model after acquiring Timework Myeongdong, it would need to negotiate changes to the contract structure and termination conditions with the existing hotel operator prior to signing the Sales and Purchase Agreement (SPA). Aegis pointed out that if the deal were to fall through midway, it would disrupt the plan to convert the property to a 4-star hotel, and the existing fund could be left liable for damages resulting from contract termination. They also presented an estimate suggesting that, based on an annual rent of approximately 7.5 billion won, the cost could reach up to 150 billion won over a 20-year period. The Aegis-Goldman Sachs consortium argues that since their structure involves first assuming the current master lease and the ongoing 4-star conversion plan, and then reviewing further conversions after the office lease expires, there is no risk of premature termination prior to the SPA.

On the other hand, the Blue Cove side refutes this, arguing that the premise is fundamentally flawed. They explain that they never requested the termination of the existing master lease agreement prior to signing the SPA and that they had even held prior discussions with the Accor operating company to transition to a managed operation model following the transfer of ownership. Our investigation revealed that the Blue Cove consortium’s proposal had indeed been conveyed to the existing hotel operator, establishing a basis for discussion.

Dispute

Over Vacancy, Share Deal

, and

Performance Deposit… Refusal of Performance Deposit Also a Point of Contention

Aegis’s stance on all qualitative and quantitative evaluation factors—including office

vacancy, the share deal

, and

the performance deposit

—is focused on “protecting against transaction failure and operational risks.”

First, regarding the office vacancy issue, Aegis argues that if the Blue Cove Consortium had been selected as the preferred bidder, it would have had to halt marketing efforts for new tenants on the 3rd and 4th floors, where the lease expires this October. They claim this concern was reflected in their assessment as a risk factor, given that the selling fund would have to bear at least 5–6 months of vacancy losses should the transaction fall through. They also assessed the request for prior consultation regarding early vacating of other floors before the signing of the Sales and Purchase Agreement (SPA) as a risk factor that would place a significant burden on asset management.

They also cited as grounds for their risk assessment the fact that, to share the risk of the transaction falling through, they had requested the establishment of a symbolic performance deposit at the Memorandum of Understanding (MOU) stage following the selection of the preferred bidder, but Blue Cove had refused to accept this. They argued that while the Blue Cove consortium, as the prospective buyer, could withdraw without incurring losses if the final financing fell through, there should have been a minimum safeguard in place to prevent the existing fund from having to shoulder any operational issues. Regarding the pursuit of a share deal, they also pointed out that preliminary reviews were insufficient regarding the risk of tax assessments resulting from the denial of property transfer tax savings, as well as issues such as a change in the custodian.

Conversely, the Blue Cove Consortium counters that Aegis may have overinterpreted the risk factors or failed to maintain fairness in its evaluation criteria. Blue Cove maintains that it did not impose any preconditions requiring the actual eviction of tenants or the completion of vacancy prior to signing the SPA, and that the costs necessary for future eviction were already factored into the project budget in advance.

Regarding the demand for a non-refundable performance deposit, they explained that bearing the burden of non-refundable funds at the pre-contract stage—before due diligence or the signing of the SPA—was a contractual condition difficult to accept given the nature of capital execution by institutional investors (LPs). They further countered that, regarding the risk of tax reassessment, they had demonstrated a strong commitment to risk management, even going so far as to convey to the lead underwriter their intention to submit a written commitment stating that the buyer would bear the full cost if necessary.

An LP official pointed out, “To determine whether the sale was conducted at a reasonable price, it might be better for an independent third party to re-examine the fairness of the preferred bidder selection process based on the bidding materials and evaluation criteria from that time.”