Funding Snag for Seoullo·Metro Tower Mixed-Use Development... Warning Over Office Oversupply in Central Seoul [Real Estate AtoZ]

Aegis Fails to Extend Bridge Loan
Unable to Form Senior Lender Syndicate by February 19
Funding Efforts Stall as Office Supply Rises in Central Northern Seoul
All-Out Push to Normalize Project Before Court Auction Next Month

Aegis Asset Management has failed to secure additional funding for the mixed-use office development project “Seoullo·Metro Tower” near Seoul Station. After the extension of the bridge loan maturity fell through last month, the company had planned to come up with a normalization plan by February 19, but was unable to finalize the syndicate of senior lenders. Analysts say investors’ lukewarm response, driven largely by the growing likelihood of increased office building supply in the central northern part of Seoul, played a significant role. Even as the possibility of a court auction is being discussed, the company is making all-out efforts to normalize the project, continuing last-minute negotiations with financial institutions.

According to the real estate industry on February 25, Aegis Asset Management failed to form a syndicate of senior lenders for the “Seoullo·Metro Tower” development project by February 19. Although the company secured roughly one month to prepare a normalization plan after obtaining a grace period on the enforcement of collateral at the bridge loan maturity last month, it did not succeed in attracting investors. Under the original schedule, the company will have to proceed with a court auction process in early March. Aegis Asset Management only stated briefly that it is “doing everything possible to normalize the project.”

The Seoullo·Metro Tower project is a development to construct new office facilities at 530 Namdaemun-ro 5-ga, Jung-gu, Seoul. It is part of the “IOTA Seoul Project” being promoted by Aegis Asset Management. The IOTA Seoul Project is a mega mixed-use complex development with a total floor area of about 460,000 square meters on and around the former Millennium Hilton Hotel site near Seoul Station. The Seoullo·Metro Tower itself is planned with a total floor area of 120,783 square meters, consisting of 9 basement levels and 34 above-ground floors. The office space will be about 113,500 square meters, and the retail space will be 7,052 square meters. Aegis Asset Management has been pushing the project through the special purpose project company YD816PFV, while construction is being handled by Samsung C&T.

The immediate reason the bridge loan maturity extension fell through is that the financial institutions serving as funding channels took a cautious stance. In particular, KB Financial Group, which holds a substantial exposure, is known to have declined to agree to the extension. A source in the investment banking (IB) industry said, “The lease pre-commitment period is short, and the project cost burden is not insignificant, so it would not have been easy to approve.”

However, at a more fundamental level, the structure of the office market in the central northern part of Seoul makes it difficult to generate returns. An industry source said, “The situation in which new supply is concentrated in the central business district (CBD) may also have had an impact.” The investment outlook is unclear because CBD office supply is expected to increase over the next several years. According to commercial real estate services firm Zenstar Mate, the vacancy rate in the CBD area is projected to rise to 9% in 2028 and to around 15% in 2029. About 2.07 million square meters of space is scheduled to be supplied over the three years from 2025 to 2027, followed by 520,000 square meters in 2028 and 3.2 million square meters in 2029.

Development is underway in several areas, including the Sewoon Redevelopment Promotion District 5-1·3 Zone (total floor area 134,218 square meters), 6-4-22·23 Zone (74,400 square meters), 3-2·3 Zone (170,749 square meters), and the Seosomun District 11·12 Zone (138,665 square meters). An industry source said, “Foreign investors who are interested in the domestic office market are reportedly asking for explanations that exclude the CBD area altogether.”

This contrasts with the Gangnam and Yeouido districts, which make up other major office areas in Seoul. Gangnam is expected to maintain a vacancy rate of 5% or less through 2027, and the Yeouido area is also expected to see limited new supply, excluding a large-scale project slated for 2028. As a result, investors tend to prefer the Gangnam Business District (GBD) or the Yeouido Business District (YBD) when it comes to the investment appeal of office properties in Seoul. The CBD, having entered a phase where new supply is heavily concentrated, is now seen as less attractive for projects that do not have sufficient lease pre-commitments in place.

That said, the real estate industry sees the likelihood of the “Seoullo·Metro Tower” development being scrapped as low. Market participants expect the process to move toward finding common ground, such as readjusting terms with the financial institutions involved in the negotiations. Another IB industry source said, “Because the CBD faces a heavier supply burden, it is viewed as riskier than YBD or GBD,” but added, “If the financial terms are revised, the collateral structure will be strengthened, so there is still room for further negotiations.”