M&G Real Estate, a property investment arm of U.K-based Prudential Group, will acquire Upsquare, the largest shopping complex in the South Korean port city of Ulsan at 150 billion won ($131 million). The city is better known as the home to the country’s largest auto maker Hyundai Motor Co. and the global No.1 ship maker Hyundai Heavy Industries Co.,

According to the investment banking industry on Monday, Upsquare Project Finance Vehicle (PFV) that owns Upsquare has decided to sell the shopping mall to M&G Real Estate at 150 billion won and both parties signed a contract last week. Upsquare PFV is a project finance vehicle launched in 2008 to build the shopping mall, and its largest shareholder is Angelo, Gordon & Co., U.S.-based alternative investment manager. M&G Real Estate’s purchase of the shopping mall is said to be long-term investment that is expected to generate up to 7-percent return per annum.

The contract also includes a clause saying that rent would be determined based on each retailer’s sales. Such floating rent system might give the buyer higher profit, but it also has a risk of failed rent payments when retailers’ sales slow. Market observers believe that M&G Real Estate has decided to acquire Upsquare for the long-term prospects for the retail market in Ulsan.

The city of Ulsan has grown into an affluent city after it became the manufacturing hub for a number of large Korean conglomerates, including Hyundai Motor and Hyundai Heavy Industries, which is one of reasons M&G Real Estate has decided to buy the shopping mall, said an official of the investment banking industry. “As big-name hotels including Lotte City Hotel and Shilla Stay, as well as department stores such as Lotte Department Store and Hyundai Department Store are located near Upsquare, the shopping mall has great growth potential,” he added.

M&G Real Estate, the property investment company, manages about 40 trillion won of operation assets. The company entered the Korean commercial real estate market in 2004 when it bought Northgate Building in Jongno, central Seoul, and Nara Building in Gangnam, southern Seoul.

In March this year, the company resold Nara Building to Koramco REITs Management and Trust Co. at 224 billion won and pocketed a profit of more than 100 billion won.

Located in Samsan-Dong, the most bustling shopping district in Ulsan, Upsquare with total floor area of 63,041.22 square meters has six underground floors and 10 ground floors. The shopping mall built in May, 2013, houses global apparel brands of UNIQLO and H&M, as well as CGV Cinemas and various restaurants and cafes.

By Song Gwang-sup

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]