Korean institutional investors are champing at the bit to return to European real estate investing once coronavirus lockdowns ease and will likely turn once again to local asset managers and brokers as deal syndicators.

The country’s asset owners, most particularly insurance companies, have been fond to buy European real estate investments as a means to meet their sizeable investment return targets. Until Covid-19 hit in February a variety of Korean asset managers and brokers were busily scooping assets across much of the continent.

“For prime offices in Paris, London and other [core European] cities, the prices are very tight: to meet our [target yield] of mid 6% to low 7% net yield we have been looking in other cities as well,” Stella Hsu, director of global alternative investment at KTB Asset Management in Seoul, told AsianInvestor this month.

Her firm bought prime buildings in Milan, Dublin and Vienna over the last 12 months.

During 2019 Korean investors made a record $12.5 billion allocations to European property, increasing their total share of the continent’s property investment market from 2% to 4%. Singaporeans, the second largest Asian group, allocated $5.6 million in 2019.

This continues into early 2020, with Korean investors making $2.2 billion of investments in the first quarter – mostly in February. That was three times the size of Singaporean investor flows, the second largest Asian group, according to RCA.

However, activity has slowed in the past recent months as Covid-19 lockdowns prevented Korean asset owners from travelling or holding beauty parades. They have instead had to invest more locally, often into assets that are unlikely to hit their investment return needs over the long term.

“In the last two weeks, Korean investors have been taking more of a wait-and- see approach. There is little confidence they will able to execute until late Q3 (the third quarter) at the earliest,” said Spencer Park, a partner at law firm Dechert in Hong Kong Park.

Spencer Park, Dechert

“However, Korean interest for European property is still strong given the need to deploy funds and for Korean asset managers to find deals so they can earn their fees.”

“The cost of currency hedges has increased over the last six months because of the increased volatility,” added Hsu of KTB. That said, she noted that the hedged returns of euro assets remain much more appealing than those of dollars. 


Korean investor appetite made itself particularly felt in Europe last year and early 2020.

The largest two deals by Korean investors were in Paris: the Lumiere Building was bought for €1.22 billion in June 2019 by a consortium including Korean firms Samsung SRA and Hanwha Investment and Securities. In the same month a joint venture between Mirae Asset Daewoo of Korea, and Amundi Real Estate bought Tour Majunga for €850 million.

“In France, deals were ending up with only Koreans as the final bidders. These investors felt the market was getting overheated and realised it was hard to get return themselves and still make return for their investors,” said Seoul-based investment consultant to Korean asset owners in Seoul who wished not to be named.

To find decent yields the investors have moved further afield, shifting from cities like Frankfurt in Germany to prime office markets in nearby major cities such as Amsterdam, Vienna, Prague, as well as cities in Spain and Sweden, the consultant added. “Cities previously unknown in Korea beyond sightseeing and travelling now come up in the context of investment.”

Some Korean investors even began seeking prime office and logistics assets in some Nordic countries, and central and southern Europe countries such as Poland and the Czech Republic, said Joseph Lee, chief executive of Seoul-based Igis Asset Management.

He said that he bid on several prime offices deals in Paris and other Western European markets last year without winning any. “There was huge liquidity including from [Korean] asset managers and securities companies who underwrite the deals then sell down shares to end investors,” he said.

Igis employs a similar model, distributing to Korean mutual aid funds and pension fund investors – which prefer investments between €30 million and €50 million ($45.32 million and $75.54 million) – and insurance companies, which prefer investments of €20 million to €30 million.

Joseph Lee, Igis


However, much of this activity has come to a halt, following the onset of the coronavirus. Igis AM’s Lee said that he focused on his home market since travel restrictions.

“We are interested in Europe, but only once the situation is more stabilised. During lockdown we can’t go there or review opportunities. Only deals that were already secured and progressed before Covid-19 were closed.”

Moreover, Covid-19 has caused a freeze in European bank lending, said Hsu, who said she had not done a deal since it took hold in Europe in early March.

“It is crucial for us to work with a European bank. Banks are not pricing anything at the moment so we are not looking [for deals]. However, if things improve, we will start looking at gateway cities,” she said.

Not all players have completely ceased operations. The head of real estate at a large Korean asset manager says he is still searching for office acquisitions across Europe’s flagship cities, including London and Frankfurt, typically seeking deal sizes of between $180 million and $320 million.

“Korean investors are still looking buildings with high-credit tenants with long-term tenancies at core locations,” said the executive on condition of anonymity, adding that he was not expecting prices to discount at these locations.

He said his institutional investors typically allocate at least €100 million to such investments, while retail allocations come a little smaller, at €70 million to €100 million. He targets between 6% and 8% return for debt investments and 8% or above for equity investments.

Other managers and consultants told AsianInvestor they are looking for yields from European real estate – almost all from prime offices in major cities – of 6% upwards.

Lee said he targeted 6.5% for logistics and 6% for office investments, both of which are held for between five and seven years. Park said return expectations for Korean real estate investors are between 6% and 9% for mezzanine debt, which make up some 60% of activity for his clients, and an internal rate of return of up to 12% or above for equity deals.