Beach resorts, landmark hotels draw South Korean companies

South Korean firms, led by one of Asia’s largest asset managers, are investing in hotels and office buildings abroad as low interest rates locally are driving them to seek better returns overseas.

Their targets are hotels and buildings with marquee names in popular tourist destinations such as Hawaii and San Francisco, where some South Korean firms are paying record prices.

Mirae Asset Global Investments is acquiring the leasehold on the Hyatt Regency Waikiki Beach Resort and Spa on the Hawaiian island of Oahu for US$780 million, a person with knowledge of the pending transaction said.

The resort, with its landmark twin towers, would be the biggest single-property hotel transaction ever in Hawaii, according to research firm Real Capital Analytics. It would mark Mirae’s second large hotel acquisition on the island chain in a year.

The Seoul-based firm bought the Fairmont Orchid hotel on Hawaii’s Big Island for US$220 million in May last year. Several months later, Mirae acquired the Fairmont San Francisco hotel, a landmark in the city, for US$450 million.

Mirae declined to comment on the Waikiki hotel deal. But a Mirae official, who did not want to be named because of company policy, said low interest rates have made investment in overseas real estate more promising.

Mirae has spent 4.94 trillion won investing in overseas properties since 2006, the official said. Landmark hotel investments have annual dividend yields of about 6 per cent, he said.

The firm has invested in seven hotels since it acquired Sydney’s Four Seasons Hotel for A$340 million in 2013, according to the Korea Times. The Waikiki hotel deal will be its largest.

South Korea’s family-run conglomerates have also been on a spending spree. Hotel Lotte acquired the New York Palace hotel for US$850 million last year. Korean Air Lines is building a hotel and office complex in Los Angeles at a cost of US$1.1 billion.

Even institutional investors are getting in on the action. South Korea’s Teachers Pension underwrote US$77 million in mezzanine debt to fund investors’ purchase of the marquee Westin St Francis hotel in San Francisco. A group of Korean insurance companies is investing about US$220 million in a mezzanine loan for the 54-storey AXA Equitable Centre at 787 Seventh Avenue in Manhattan.