Bid heats up for IGIS-owned co-living building in Seoul

An auction for a co-living building, owned by South Korea’s top real estate asset management firm IGIS Asset Management Co., in the hip Hongdae area in Seoul, has garnered strong investor interest, with SK D&D Co. and Blackstone Inc. among the five short-listed bidders.   

According to sources in the investment banking industry on Monday, the bid has drawn five contenders, including D&D Investment, a Blackstone-Travelodge consortium and a Kolon House Vision-Aion Investment Management consortium.

The mixed-use building up for grabs offers short and long-term accommodations, including co-living studios and hotel rooms for tourists. Located near the Hongik University town, commonly known as Hongdae Street, the property spans three basement floors and seven above-ground floors, with a total floor area of 17,000 square meters.

Named Noudit Hongdae by its developer but Creator Town Seogyo by its operator and manager, Local Stitch, the site provides 296 private rooms, shared kitchens, various amenities like a fitness center, as well as retail and co-working spaces.

The property is leased to Local Stitch, a Korean co-living space operating company managing 23 locations nationwide, by 2033.

IGIS acquired the building in 2021 via its listed REIT company, IGIS Residence REIT Co., for about 132 billion won ($95.1 million), but put it up for sale ahead of a loan repayment due next month.

The sale, led by Cushman & Wakefield Korea, is expected to fetch about 150 billion won.

IGIS is currently evaluating the bidders’ offers and plans to pick a preferred bidder in June.

HIGH EXPECTATIONS FOR REVENUE POTENTIAL 

Constructed in April 2023, the building had an occupancy rate of 96% in 2024, supported by its prime location in vibrant Hongdae, home to hundreds of trendy restaurants, unique bars and booming clubs.

Attracted by the property’s handsome income-generating potential, several major real estate investors have joined the bid.

D&D Investment is an REIT asset manager under SK D&D, a real estate unit of Korea’s major conglomerate SK Group.

SK D&D provides comprehensive property management services and space management solutions through D&D Property Solutions (DDPS), a subsidiary specializing in real estate operations and management, which recently acquired Local Stitch.

SK D&D sees potential operational synergies, as Creator Town Seogyo is the biggest co-living site of Local Stitch.

Kolon House Vision Co., the rental business arm of mid-sized Korean builder Kolon Global Corp., has joined hands with local investor Aion Asset Management to bid on the property and expand its co-living portfolio.  

The Blackstone consortium, which includes a global hospitality company, Travelodge Hotels Ltd., is expected to convert the building into a hotel.

The duo acquired an office building in the Gangnam district last year with a similar redevelopment plan.

Given the asset’s hotel-like layout, conversion costs would be minimal, and hotel operations are expected to yield higher returns.

Other investors are also said to have considered a hotel conversion, according to sources.

Co-living has gained traction in Korea amid a rise in single-person households and shifting housing preferences.

Its flexible tenancy terms and modern, amenity-rich environments appeal to a diverse range of tenants, from students, to young professionals to those seeking adaptable living arrangements.

Write to Gyeong-Jin Min at min@hankyung.com
Sookyung Seo edited this article.