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US private equity firm KKR to invest in office property in southern Seoul

[SEOUL] A group of companies led by KKR & Co will invest in an existing real estate project under construction in the Gangnam district of Seoul, South Korea, hoping to cash in on one of the world's fastest-rising commercial property markets.

The US private equity firm will invest along with South Korea's National Pension Service and IGIS Asset Management, the country's biggest real estate fund manager, KKR said in a statement.

The project will include office space, retail space, and a five-star hotel, with a gross floor area of 239,188 square metres, the statement said.

The total cost of the project is expected to be about 2.1 trillion won (S$3.2 billion), or US$1.9 billion, which includes the purchase price paid by the group and other costs, KKR said.

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The project is KKR's biggest real estate investment in South Korea, said a spokesman for the firm who declined to be named.

Seoul's affluent southern Gangnam district gained international fame thanks to the song and music video for Gangnam Style by South Korean pop star Psy.

The area of the South Korean capital is home to one of the major offices of Samsung Group, though the company agreed in September to sell the building for 748 billion won. Hyundai Motor Group will also build its new headquarters in Gangnam.

Investors spent US$10.4 billion on office assets in Seoul in the 12 months through June 2018, second only to Hong Kong in the Asia-Pacific region, according to a report by Real Capital Analytic.

Seoul registered the fifth-fastest price growth of major global markets in the second quarter, with commercial property prices rising by 7.8 per cent year-over-year, according to the report released this month.

KKR in January sold a prime office complex in central Seoul, which it bought in 2014. KKR did not release the price, but real estate services firm Cushman & Wakefield said the deal was priced at 713 billion won, or 28.1 million won per pyeong (3.3 square metres), a record high for an office building.