Why Did the Office Building Skyrocket to 44 Billion Won in Just Six Months After Being Sold to SK?

Jongno Tower Transformed into SK Green Campus
Seorin Building Purchase Price 11.5% Higher Than 1.185 Trillion KRW
Lotte Home Shopping Buys Office Building... Taekwang Opposes

In recent years, as real estate prices have surged, the prices of corporate headquarters buildings have skyrocketed, increasing interest in the use and disposal of these buildings by various companies. Recently, various transactions and disputes have also arisen regarding corporate headquarters.

Jongno Tower, known as a 'landmark' in Jongno, Seoul, is currently used as the 'SK Green Campus' by SK Group's eco-friendly business affiliates such as SK On, SK Energy, SK E&S, SK Geocentric, SK Ecoplant, and SK Forestry.

Jongno Tower was built by Samsung Life Insurance in 1999 and has been used by the National Tax Service and Samsung Securities. Later, it passed through Aegis Asset Management and KB Asset Management before coming under SK Group's ownership last October. SK REITs (Real Estate Investment Trust) purchased it for 621.5 billion KRW. According to an appraisal conducted by SK REITs at the end of June, the current value is 665.8 billion KRW, showing a 7.1% increase compared to the purchase price.

In addition to Jongno Tower, SK REITs owns the group's headquarters building, SK Seorin Building, Bundang U Tower used by SK Hynix, and 116 gas stations operated by SK Energy. The Seorin Building, completed in the same year as Jongno Tower, is a work by architect Kim Jong-sung and is characterized by its black exterior. Currently, the holding company SK Inc. and affiliates such as SK Innovation are tenants.

SK REITs purchased the Seorin Building in July 2021 for 1.03 trillion KRW, and its current value has risen by 11.5% to 1.1185 trillion KRW. The current value of U Tower is 548.6 billion KRW, an 8.2% increase from the purchase price of 507.2 billion KRW in June last year.

SK Group established SK REITs in 2021 to securitize its real estate assets. SK REITs is pushing to acquire the SK Hynix Icheon water treatment center, an industrial facility, marking a first in the REITs industry. The estimated purchase price alone is 1.12 trillion KRW, more than double the value of the existing properties held.

Some critics argue that SK REITs is being used as a channel to secure liquidity for SK Hynix. Samsung Securities lowered its target price, stating, "The SK Hynix water treatment center is a low-versatility asset with limited potential for value appreciation, so some dilution of the valuation premium previously granted to SK REITs is inevitable."

Disputes have also arisen between in-law groups over the purchase of company headquarters. Lotte Group and Taekwang Group are in conflict over the purchase of Lotte Homeshopping's Yangpyeong-dong headquarters building.

At a board meeting held on July 27, Lotte Homeshopping decided to purchase the land and building in Yangpyeong-dong for 203.9 billion KRW. The property is owned by Lotte Holdings (64.6%) and Lotte Wellfood (35.4%). However, Taekwang Industrial, the second-largest shareholder of Lotte Homeshopping, filed a provisional injunction with the court on July 29 to suspend the effectiveness of the board resolution, opposing the purchase.

Taekwang Industrial claims, "The purchase of the headquarters by Lotte Homeshopping is a form of support for group affiliates such as Lotte Holdings," and argues that "purchasing the building at an excessively high price could constitute a breach of fiduciary duty."

Furthermore, Taekwang Industrial revealed that last November, Lotte Group considered using Lotte Homeshopping's retained earnings to support Lotte Construction with 500 billion KRW in funding, but due to Taekwang Industrial's opposition, only 100 billion KRW was lent.

On the other hand, Lotte expressed embarrassment, stating, "The matter was unanimously approved at the board meeting, but Taekwang suddenly reversed its position." The head of Taekwang Group, former Taekwang Industrial chairman Lee Ho-jin, is the son-in-law of Shin Seon-ho, the brother of the late Shin Kyuk-ho, founder of Lotte Group, and chairman of Japan's Sansu.

Regardless of its symbolic value, company headquarters buildings are sometimes used as collateral for urgent financing. The Global R&D Center (GRC) in Pangyo, declared by HD Hyundai Chairman Kwon Oh-gap as the "core of the new 50-year leap," was pledged last month as collateral for a 300 billion KRW facility loan from the Korea Development Bank just six months after the group moved in.