[Asia Economy Reporter Junho Hwang] Mirae Asset Global Investments has ended purchase negotiations with Brookfield Asset Management, the seller of the Yeouido International Finance Center (IFC). It has also filed a lawsuit with the Singapore International Arbitration Centre (SIAC) to recover the performance bond.
In late May, Mirae Asset signed a memorandum of understanding (MOU) for the purchase of IFC and paid a deposit of 200 billion KRW to fulfill the MOU. It is known that both parties agreed on the condition that if the business license for the REIT established by Mirae Asset to purchase IFC was not obtained by the end of the exclusive negotiation period, the full deposit would be refunded.
However, immediately after being selected as the preferred bidder, Mirae Asset applied for the business license of 'Sage REIT' and made all-out efforts, but failed to obtain the business license for Sage REIT, which was established to purchase IFC, by August.
Since then, Mirae Asset has continued negotiations with Brookfield, proposing various alternative transaction structures instead of the REIT to finalize the IFC purchase deal. A significant portion of domestic and foreign investors capable of investing large sums of money has already been secured. However, Brookfield rejected the transaction structures proposed by Mirae Asset this time and insisted on an offshore transaction. Brookfield, which had finally agreed to an onshore transaction during the bidding, changed its stance to attempt an offshore transaction after failing to obtain the REIT business license.
Originally, Mirae Asset Global Investments planned to acquire shares in five domestic SPCs through this transaction, and Brookfield Asset Management was to pay corporate tax on capital gains to the Korean government according to Korean law, but Brookfield refused this. If Brookfield trades with an offshore entity abroad, it can avoid paying taxes amounting to hundreds of billions of KRW to the Korean tax authorities. However, domestic and foreign investors including Mirae Asset have consistently insisted from the beginning of the bidding that the seller must pay taxes on the IFC capital gains to the Korean tax authorities under the condition of an onshore transaction.
In particular, Mirae Asset requested the return of the deposit according to procedure, but the seller refused to return the deposit, claiming that the failure to obtain the license was Mirae Asset's responsibility.
Accordingly, Mirae Asset has applied for international dispute arbitration at the Singapore Arbitration Centre to recover the deposit amounting to 200 billion KRW. It is reported that if the deal fails due to the seller's fault, Mirae Asset, as the buyer, will also claim additional damages.
An investment banking industry official said, "It seems that the final agreement was not reached due to rapid interest rate hikes and exchange rate volatility," adding, "An MOU is a preliminary business agreement conducted before the main contract, and if the final agreement between the IB parties is not reached due to sudden market changes, it is common that the main contract is not concluded."
Meanwhile, IFC consists of three office buildings, the Conrad Hotel, and the IFC Mall, and has been operated by five domestic special purpose companies (SPCs) that each own one of the five properties.
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