법무법인(유한) 율촌 | Yulchon LLC

Yulchon's Real Estate Team advised on the KRW 1.2 trillion acquisition of an office building under construction in Seoul. The acquisition was structured and consummated using 2 different REITs; tax efficient real estate investment vehicles available under the Real Estate Investment Act of Korea. The REITs are established and managed by Koramco Reits Management and Trust Co., Ltd., and the National Pension Service will be the primary investor. The building, once completed, will be located in Cheongjin-dong, Jongro-gu, Seoul, and consists of 7 underground floors and 24 floors above ground with a total building area of 175,536.70m2.
 

As an acquisition financing, four SPCs were set up by investors as investment vehicles for the purposes of making equity investments into the REITs as well as providing debt financing to the REITs, which investment proceeds were financed by the issuance of ABCPs by the SPCs and applied to fund the contract deposit equivalent to 10% of the acquisition price. The balance of the acquisition price will be paid at closing with the investment proceeds from the National Pension Service into the REITs. The National Pension Service will eventually hold the entire equity interest in the REITs (excluding those which are publicly offered). It is also expected that GS E&C will master-lease the entire building for 10 to 20 years upon completion, which will produce a stable rental income stream for the REITs.

Yulchon's Real Estate Team served as lead counsel on this complex multi-party transaction, ranging from due diligence, drafting and negotiation of various transaction documents (including the purchase and sale agreement, the master lease agreement, investment agreement, share subscription agreement, financing documents, and other ancillary documents), and establishment of the REITs (including procurement of business licenses for the REITs from Ministry of Land, Transport and Maritime Affairs).
 

This transaction is the largest acquisition to date by a REIT in Korea, and the first acquisition by the National Pension Service of an office building under construction.
 

Partner Tae Jin Cha and associates Jinseok Choi, Young Hur, Ju Hui Lee, Chung Min Lee and Ka Young Kim from Yulchon's Real Estate Team handled the project and partner Ju Bong Park from Yulchon's Core Team provided advice on dispute prevention.