Aegis, Marston, and Koramco Bow Their Heads Amid Real Estate Market Slump... Key to 'Rebound' Next Year

Real Estate Market Conditions Worsen Due to High Interest Rates and Economic Recession
Sharp Decline in Performance Compared to Q3 Last Year... Koramco Records Operating Loss
Performance Improvement Expected Next Year with Interest Rate Cuts and Investment Portfolio Diversification

Yeouido Securities District. Photo by Hyunmin Kim kimhyun81@

Aegis Asset Management, Marsten Investment Management, and Koramco Asset Trust, three specialized real estate asset management firms, all posted poor performance this year. The prolonged global high interest rates have significantly contributed to the real estate market entering a recession phase. However, a turnaround is expected next year. Signals of interest rate cuts are emerging, led by the United States. Additionally, these three companies plan to increase investments in sectors beyond real estate.

According to the Korea Financial Investment Association on the 15th, the combined cumulative operating revenue of Aegis Asset Management, Marsten Investment Management, and Koramco Asset Trust through the third quarter of this year was KRW 305.846902812 billion, a 43.2% decrease compared to KRW 538.464519024 billion during the same period last year. The combined operating profit and net income decreased by 80.2% and 78.2%, respectively, to KRW 58.033594424 billion and KRW 49.097881261 billion.

Specifically, Aegis Asset Management’s operating revenue dropped from KRW 289.7228169695 billion to KRW 171.175728337 billion, a 40.92% decrease, and operating profit fell from KRW 179.420625 billion to KRW 45.972117 billion, a 74.37% decline. Net income also decreased by approximately 72.2%, from KRW 134.810225 billion to KRW 37.417185 billion.

Marsten Investment Management’s operating profit declined from KRW 34.020859 billion to KRW 13.397626 billion, and net income fell from KRW 28.066362 billion to KRW 10.658410 billion. Koramco Asset Trust’s operating profit shifted from KRW 79.921359 billion to an operating loss of KRW 1.248285 billion. Net income decreased from KRW 62.530205 billion to KRW 1.022286 billion.

The deterioration in the performance of these three companies is due to the real estate market freezing amid continued high interest rates. According to All Square, a comprehensive commercial real estate service company, the transaction volume of office commercial buildings in Seoul from the beginning of the year to the end of September was KRW 8.8067 trillion, a 55.1% decrease compared to KRW 19.6049 trillion during the same period last year.

As a result, the real estate project financing (PF) market has also cooled. The delinquency rate on real estate PF loans in the financial sector was 2.42% as of the end of September, up 0.24 percentage points from 2.17% at the end of June. Compared to 1.19% at the end of last year, it increased by 1.23 percentage points.

A Koramco Asset Trust official stated, "In a rising interest rate environment, the expectations between sellers and buyers did not align," adding, "Investors are also making more conservative judgments." They further explained, "As a result, companies primarily operating commercial real estate had fewer deals overall, leading to lower profits than before."

Efforts to find a breakthrough amid worsening market conditions and performance continued. Aegis Asset Management proceeded with the acquisition of Yongsan Prime Tower and investments in overseas secondary blind funds. Additionally, they raised entrusted fund capital to support the normalization of project financing sites managed by Korea Asset Management Corporation (KAMCO). This was an attempt to diversify revenue structures by injecting funds into projects while preemptively entering the non-performing loan (NPL) market.

Marsten Investment Management confirmed the acquisition of the Concordian Building in Gwanghwamun in the first half of this year. The seller was DWS Asset Management, and the transaction amount was approximately KRW 629.2 billion. They also focused investments on Seongsu-dong, known as Korea’s Brooklyn. They secured the acquisition of Musinsa Campus E1 located in Seongsu-dong and confirmed the pre-purchase of a large office building there. This involved Samwon PFV redesigning an asset originally planned as a knowledge industry center into an office building, completing permits, and then pre-purchasing it.

Koramco Asset Trust also purchased Seocho Majesta City Tower 1 for about KRW 550 billion. Previously, Koramco had continuously managed both Majesta City Tower 1 and its twin building Tower 2, located right next to each other, since their completion. Integrating the management of these two assets, which were previously managed separately, is expected to create synergy effects in terms of cost and efficiency.

These three companies expect the market situation to improve next year compared to this year. Above all, interest rates are expected to decline starting this year. They are also diversifying their strategies.

Aegis Asset Management plans to diversify its investment portfolio. They intend to invest in various sectors including securities as well as real estate. Aegis Asset Management stated, "We will expand investment opportunities in new growth sectors such as data centers and life sciences while simultaneously making solid investments in traditional sectors such as offices, retail, and hotels. We plan to prepare a meaningful year for portfolio diversification beyond real estate, including securities and infrastructure."

Marsten Investment Management is hopeful for market improvement next year. A Marsten Investment Management official said, "We expect the market environment to improve somewhat if interest rates fall," adding, "Offices in central business districts (CBD), Yeouido business districts (YBD), and Gangnam business districts (GBD) still have solid fundamentals, so we believe active efforts in these areas will improve profits."

Koramco Asset Trust is targeting 'trophy assets.' In the market, symbolic real estate is called trophy assets, also known as unique investment assets. Currently, Koramco Asset Trust has been selected as the preferred negotiator for the acquisition of Arc Place near Yeoksam Station in Seoul and is conducting negotiations. A Koramco Asset Trust official said, "Blackstone currently owns this asset, and the deal is expected to be finalized as early as the first half of next year," adding, "If successful, it could be the largest deal in Korea next year."