SEOUL, South Korea—Shares of Korea's largest automaker Hyundai dropped 9% after the company agreed to pay three times the assessed value of a large, central property that will become its headquarters and an auto-themed tourist park.
The $10.14 billion (10.6 trillion won) bid was also more than twice that of Samsung, the only other qualified bidder for the electric utility property, according to media reports. It is certainly the largest deal in Korea since the economic collapse, and is most likely the nation's priciest real estate transaction ever.
Reuters said investors and analysts were shocked at the Hyundai was willing to pay for the site.
"The bid price is nonsense. I was stunned," said Kim Sung-soo, a fund manager at LS Asset Management, who spoke with Reuters. "Even taking into account competition with Samsung, the bid price is excessive," Kim said, adding that he expected it to cost another $6 billion to develop the property in the trndy Gangnam district in the heart of South Korea's capitol city.
But company officials say Hyundai and its sister nameplate KIA, need a world-class HQ location to stay competitive, noting that European rivals, including Volkswagen and BMW, have a tourism element to their headquarters. In addition, company officials say they plan to develop and lease office space to more than 30 affiliated companies.
Electric utility firm Kepco announced in July that it planned to sell the property before relocating to South Jeolla province in November, as part of a national effort to develop those regions.
“This looks like the largest ever land transaction deal in Korea,” JoAnn Hong, Seoul-based director at Savills Plc, told Bloomberg. “The price tag for the land looks a bit high for now, but it all depends on how Hyundai will develop it and create value there.”
Click Reuters to read the full story.
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David Phillips
David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.
