A group of affluent individuals would come up with 90 billion won ($75.5 million) to jointly own a Homeplus Co. superstore outlet in the suburban city of Pyeongchon, Gyeonggi Province, evidence that retail investors are joining their institutional counterparts in search for alternative investment options amid prolonged low-interest rate environment.
According to investment industry on Tuesday, Vestas Investment Management Co. was named as a preferred bidder to buy Homeplus’s Pyeongchon branch from Alpha Asset Management Co. The purchase price is expected to reach about 90 billion won.
Vestas, a Seoul-based investment manager that specializes in real estate investment, will be creating a private equity fund in hands with wealthy retail investors for the takeover deal, raising 30 billion won through the individual investors and borrowing the remainder from financial institutions.
The investment manager tapped demand from retail investors through preferred client service centers of banks and brokerage houses in affluent neighborhoods in Seoul last week. There are many clients who are seeking medium-risk and medium-return private equity investment products amid low-interest rate environment and they are willing to invest up to billions of wons, said a preferred client service center officer who asked to be unnamed.
The elite client banking and brokerage service centers are planning to offer the real estate private equity fund from mid-November until the end of this year. The fund limits the number of retail investors to 49, requiring each individual to invest roughly 600 million won in average. Vestas Investment Management expects its real estate private equity fund to become popular among well-to-do retail investors as it carries lower risk compared to securities and delivers higher profits than bonds. This would be one of very few cases in Korea that a small group of rich individuals taking over a large-sized hypermarket by creating a real estate fund, market experts said.
The Homeplus Pyeongchon branch is in Pyeongchon, a new town located on the southern outskirt of Seoul. The superstore with a total area of 28,582 square meters is four floors high above ground and two floors below. Sitting near a large-sized residential district with easy access to public transportations, the hypermarket outlet has steadily generated profits since it opened in 2008. The retail outlet is attached to a 12-year lease contract with household name Homeplus and it expects to deliver profits with annual return rate of between 5 and 6 percent.