$500 Million Invested : S. Koreans Find L.A. Real Estate to Be a Bargain

Hot on the heels of the Japanese, South Korean real estate investors have snapped up nearly $500 million worth of Southern California properties--including the Los Angeles Hilton Hotel and Towers--in the past six weeks, a partner of Arthur Andersen & Co. said Monday.

“I didn’t expect them to move quite this fast,” said Darlene W. Ryan at Arthur Andersen’s Real Estate Services Group. She had predicted that South Korean real estate investments in the United States would hit $1 billion for the entire year.

Under recent changes by the South Korean government, Korean companies are now allowed to invest up to $5 million in foreign real estate and individuals can invest up to $2 million. Investments over those amounts, however, require approval by the South Korean government. South Korean real estate investments abroad previously were limited to $1 million, for commercial purposes only and required prior government approval.

Ryan said the changes, which took effect in February, are intended to help ease trade friction--specifically with the United States, which has complained of its trade deficit with South Korea--and to curb inflation in that country.

Wilshire Boulevard Purchases

“Real property in Seoul is just like Tokyo, it is getting very expensive,” explained David W. Lee, a Los Angeles attorney who works with many South Korean companies. That factor, coupled with the strong won, enables Korean investors to find good projects, he said. Korean purchases are low-key and relatively modest, compared to earlier high-profile Japanese investments.

The initial flurry of purchases have centered in the Los Angeles area. Earlier this month, Korean Air Lines agreed to purchase the Los Angeles Hilton Hotel and Towers for $168 million--the biggest South Korean investment to date, according to Ryan. The airline purchased the Anchorage Sheraton Hotel in Anchorage last year for an undisclosed price. It has owned Waikiki Resort Hotel in Honolulu for several years.

Meanwhile, Lucky Development, a unit of Lucky-Goldstar Group, recently purchased the mid-Wilshire 11-story Beneficial Plaza, now known as the Wilshire Park Place Building, for $40 million in a limited partnership with Bechtel Investments, which is affiliated with San Francisco-based Bechtel Group.

Comfortable in Los Angeles

South Korean investors reportedly are in negotiations to buy the Wilshire Hyatt for $38 million. Ryan said there are also unconfirmed reports of South Korean interest in the Equitable Building on Wilshire Blvd. Korean press reports have said that Hyundai is looking to build a $60-million office building in Los Angeles or New Jersey.

Meanwhile, Ssangyong Construction, a major South Korea-based construction firm which has $50 million in U.S. properties completed or under construction, is building its second U.S. hotel in San Diego for $14 million. It recently completed the $19-million Residence Inn, a 200-suite hotel in Anaheim, and the $10-million Bayview Plaza shopping mall in San Francisco. Ssangyong USA, a sister company, owns property in New Jersey and Houston.

Lee, the attorney, explained the attraction of Los Angeles to the South Korean investor, “In Los Angeles, there are 500,000 Koreans. A lot of branch offices (of Korean companies) are here; the West Coast is closer to Korea. There is a feeling of comfort here. Koreans say the city of Los Angeles is a county of Seoul.”

Ryan said other areas of investor interest are Hawaii, New York and New Jersey, which is a popular U.S. base for South Korean companies.

To encourage corporate investments abroad, Lee said, the Korea Export-Import Bank is making about $150 million available for financing. Since most property purchases in South Korea are made for all cash, he says Korean investors find the American style of financing a down payment and the practice of installment payments “fascinating.”