Korean real estate firms put up for sale amid lasting market downturn

A growing number of private real estate firms are being put up for sale in South Korea amid a prolonged market downturn and increasing delinquencies in property development project finance.  

Fastfive Co., a co-working space operator, sold a 100% stake in real estate manager Fairfield Asset Management Co. to local solar power plant management firm Blackwood Renewables for an undisclosed price last month, according to banking sources on Monday.

Fastfive acquired Fairfield in November 2022 to boost the synergy effect between its co-working space management business and real estate investment. Fastfive tapped Yu Kwang-Seok, a former executive at Korea’s leading real estate firm Mastern Investment Management Co., as the president of Fairfield.

But delinquencies in real estate project financing in Korea surged after the acquisition of Fairfield, amid the sluggish property development market and rising interest rates. Fastfive decided to sell off Fairfield a year after it acquired the real estate manager.

More investors are divesting or considering selling off real estate firms in their portfolios amid the slowdown in the property market.  

ARA Korea Ltd., which Brookfield Asset Management Ltd. has picked as the preferred bidder for luxury hotel Conrad Seoul, is selling off its non-core assets.

ESR Group Ltd., ARA’s parent and one of the largest real asset managers in Asia-Pacific, said on Monday that it agreed to sell ARA’s private fund business in Korea, Australia, Singapore and the US to Sumitomo Mitsui Finance and Leasing Co. for $270 million.

Key stakeholders of IGIS Asset Management Co., the largest real estate firm in Korea, halted the process of selling the company’s controlling stake last week.

Banking sources say that IGIS, the operating profit of which dropped 69% on-year to 55 billion won last year, will focus on earnings improvement for the time being to achieve a higher valuation for the sale.

Mastern is also open to selling its equities to external investors, hinting at a possibility of putting the real estate firm’s controlling stake on the market.

As the investment environment deteriorates, it has become harder to predict whether real estate sellers will close their deals, industry sources said. The number of strategic investors in real estate is also declining amid a lasting market downturn and as more overseas funds extend their maturities, worsening Korean investors' liquidity crisis, sources added.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Jihyun Kim edited this article.