Myeongdong 230 Billion Won Hotel Up for Auction... If Unsold Due to Recession, Re-auction at -20%

Hotels Skypark Myeongdong 2 Branch and 2 Other Buildings
Auction Applicant is NH Investment & Securities Special Purpose Company

Two buildings of Hotel Skypark, located in the heart of Myeongdong, Jung-gu, Seoul, will be put up for auction on the 29th. The appraised value of this hotel is approximately 230 billion KRW, making it the fourth highest in auction history, drawing significant attention to whether it will be sold.

According to Gigi Auction, a company specializing in auction and public sale data, the auction for the Myeongdong Central Building and Wise Building in Euljiro 2-ga, Jung-gu, Seoul, will take place on the 29th. These two buildings are adjacent to each other, with sizes ranging from 7 basement floors to 16 above-ground floors, and 10 basement floors to 15 above-ground floors, respectively. The two buildings are known as "Hotel Skypark Myeongdong Branch 2" and "Hotel Skypark Central Myeongdong Branch," with an appraised value set at 229.26 billion KRW. Since they are located on prime land in Myeongdong, the land value is estimated at 280 million KRW per 3.3㎡, totaling 198.45 billion KRW, and the building value is estimated at 30.8 billion KRW.

These buildings are situated in the center of the Myeongdong tourist district and are close to Euljiro 1-ga Station on Subway Line 2 and the airport limousine bus stop, making them popular accommodations among foreign tourists.

Auction Claim Amount: 195.36 billion KRW

The appearance of Hotel Skypark Myeongdong 2nd Branch and Central Myeongdong Branch in Jung-gu, Seoul, scheduled for auction on the 29th.
[Photo by Yonhap News]

The auction applicant for Hotel Skypark is "RH Je Samja," with a claim amount of 195.36 billion KRW. RH Je Samja is a special purpose company established by NH Investment & Securities. When KB Asset Management acquired this building through a fund in 2018, NH Investment & Securities raised investors through the special purpose company and lent the claim amount to KB Asset Management.

Typically, such funds have a five-year maturity, so KB Asset Management attempted to sell the property earlier this year before maturity. However, due to the slump in hotel demand caused by COVID-19, the sale was not completed, and NH Investment & Securities ultimately proceeded with the auction.

The appraised value of this hotel is the fourth highest ever in auction history.

The highest appraised property in history was the former Daewoo Motor site and 25 other plots totaling 926,952㎡ in Okryeon-dong and Dongchun-dong, Yeonsu-gu, Incheon, appraised at 1.0481 trillion KRW in 2014. Following that, a land plot in Adong-ri, Gaejeong-myeon, Gunsan-si, Jeonbuk, was auctioned at 525.2 billion KRW in 2001, and the Cheongdaemun Building (formerly "Preyataun") in Euljiro, Jung-gu, Seoul, was auctioned at 441.8 billion KRW in 2014.

Auction experts are not optimistic about whether Hotel Skypark will find a new owner through the auction. Due to the extremely high price, demand is inevitably limited, and the hotel industry, which has been struggling due to the COVID-19 impact, has not fully recovered.

Senior researcher Joo Hyun Lee of Gigi Auction said, "Tourist demand has not recovered to previous levels, and demand for such high-priced properties is limited, making it difficult to find a buyer. From the buyer's perspective, profitability would require repurposing the building, which also involves time and costs." In fact, none of the top three highest appraised properties in history were sold through auction.

If Hotel Skypark fails to sell at the auction on the 29th, a re-auction will be held around January next year at 20% below the initial appraised value, at 183.4 billion KRW.