[Edaily Marketin, Reporter KIM SUNG-SOO ] NH Prime REIT has reinvested the proceeds from the sale of Seoul Square into prime office properties in Seoul’s Gangnam and Euljiro districts.

The company has selected the Gangnam headquarters building leased by an affiliate of Hana Financial Group and Tower A of Fine Avenue, which is under a long-term lease by Shinhan Card, as its new investment targets. The strategy is to secure stable rental income while also aiming for future capital gains from the sale.

Investments of 15 billion won in Hana Financial’s Gangnam Headquarters and 26 billion won in Fine Avenue Tower A

According to the financial investment industry on the 13th, NH Prime REIT invested 15 billion won in equity securities for the “Hana Financial Group Gangnam Office Building” in the Teheran-ro area of Gangnam-gu, Seoul, and 26 billion won in income securities for “Fine Avenue Tower A” located in Euljiro, Jung-gu, Seoul. The total amount invested in these two assets is 41 billion won.

The Hana Financial Group Gangnam Office Building is owned by Hana Office Trust Management Real Estate Investment Trust (hereinafter “Hana Office REIT”). Located at 127 Teheran-ro, Gangnam-gu, Seoul, it is an office building with 6 basement levels and 20 above-ground floors, boasting a total floor area of 24,530 square meters.

One of the key investment attractions is the expected rental stability, as approximately 75% of the leasable area is occupied by Hana Financial Group affiliates, such as Hana Capital and Hana Asset Trust.

Hana Office REIT’s total investment in this asset amounts to 329.35 billion won. This figure consists of the real estate purchase price of 282 billion won—equivalent to 38 million won per 3.3 square meters (pyeong)—plus 12 billion won in shares of a subsidiary REIT and 35.35 billion won in financing costs.

The initial cap rate is 3.55%. The initial cap rate refers to the rate of return calculated by dividing the net operating income (NOI) generated during the first year immediately following the purchase of the property by the initial purchase price.

The structure of Hana Office REIT’s investment in this asset consists of: △ a lease deposit of 10.6 billion won; △ a senior loan of 215.5 billion won; △ Class 6 preferred shares worth 65 billion won; △ Class 5 preferred shares worth 6.05 billion won; △ Class 4 preferred shares worth 8 billion won; and △ common stock worth 24.2 billion won. The all-in interest rate on the 215.5 billion won senior loan is 4.35%, and the term is two years.

NH Prime REIT invested 15 billion won in Class 6 preferred stock. Class 6 preferred stock (65 billion won) accounts for 63% of the total equity, which includes common stock (24.2 billion won), Class 4 preferred stock (8 billion won), and Class 5 preferred stock (6.05 billion won).

The Class 6 shares in which NH Prime REIT invested have an average annual dividend yield of 6.8% and an internal rate of return (IRR) of 10.6%. The distribution rate for capital gains is set at 25%.

Expectations regarding the future sale price were also factored in. NH Prime REIT assumed a potential future sale price for the Hana Financial Group Gangnam Headquarters of 355.4 billion won, or approximately 47.9 million won per 3.3 square meters. If sold at this price, the exit cap rate is estimated at 4.8%. However, this is a hypothetical figure based on the assumption of a future sale and does not represent a confirmed actual sale price or yield.

Targeting Both Rental Stability and Capital Gains… Aiming to “Kill Two Birds with One Stone”

NH Prime REIT also invested 26 billion won in Type 1-1 beneficiary certificates of MDM General Private Real Estate Investment Trust No. 24, which owns Fine Avenue Building A located on Eulji-ro in Jung-gu, Seoul.

Fine Avenue Building A is located at 100 Eulji-ro, Jung-gu, Seoul, and consists of 6 basement levels and 25 above-ground floors, with a total floor area of approximately 65,774 square meters. The total floor area of Fine Avenue, comprising both Buildings A and B, amounts to approximately 130,000 square meters.

Fine Avenue is situated on the corner of the Euljiro 2-ga intersection, ensuring high visibility. It is connected via an underground passage to Euljiro 3-ga Station, a transfer station for Subway Lines 2 and 3, providing excellent public transportation access.

Notably, the property features a master lease structure, with Shinhan Card leasing the entire building for 10 years. Shinhan Card sold the building to MDM Asset Management through a sale-and-leaseback arrangement and will continue to lease it on a long-term basis.

Colliers Korea, a global commercial real estate consulting firm, served as the sale advisor. Since the existing tenant will continue to lease the property for an extended period even after the sale, investors can expect stable rental income.

MDM General Private Real Estate Investment Trust No. 24, managed by MDM Asset Management, acquired Fine Avenue Building A for 800 billion won. This amounts to approximately 40.2 million won per 3.3 square meters, with an initial cap rate of 5.06%. The total investment cost, which includes the purchase price plus 59.4 billion won in acquisition-related expenses and 4.0 billion won in contingency funds, amounts to 863.4 billion won.

Funding consisted of: △ 28.4 billion won in lease deposits; △ 530 billion won in senior loans; △ 74 billion won in subordinated loans; △ 151 billion won in Class 1-1 income securities; △ 20 billion won in Class 1-2 income securities; and △ 60 billion won in Class 2 income securities. The all-in interest rate for the senior loan is 4.90%, and for the subordinated loan, it is 5.80%; both have a term of two years.

Class 1-1 revenue securities (151 billion won) account for 65.4% of the total equity investment amount of 231 billion won. The average annual dividend yield for these revenue securities is 7.0%, the IRR is 10.7%, and the distribution ratio for capital gains is 35.5%.

NH Prime REITs assumed a future potential sale price for Fine Avenue Building A of 1.032 trillion won, or approximately 51.87 million won per 3.3 square meters. In this scenario, the exit cap rate is estimated at 5.0%. As with the Hana Financial Group Gangnam Headquarters, the future sale price and yield may vary depending on market conditions and actual transaction terms.

A financial investment industry official stated, “This reinvestment by NH Prime REIT is significant in that it has shifted funds secured from the sale of Seoul Square into office assets backed by stable rental income,” adding, “By investing in an asset with major tenants such as affiliates of Hana Financial Group and Shinhan Card, the REIT is pursuing cash flow while also targeting capital gains from future increases in asset value.”