Hyundai Motor Group, the famous automobile maker, will reportedly pay $10 billion for a site in Seoul, where it plans on building its headquarters. The car-maker outbid Samsung Electronics to buy the Gangnam District site in the capital of South Korea.
This is one of the most expensive real estate deals in South Korea and is also apparently triple the assessed value of the 854,030-square-foot location. According to CBRE Research, this is the most expensive real estate deal in Asia since the financial crisis.
Hyundai submitted the offer along with its affiliates - Kia Motors Corp and Hyundai Mobis Co. Samsung's bid amount was not revealed, according to The Wall Street Journal.
"We deem our bidding price [for the Gangnam site] to be reasonable, given the need to build a global [business] control tower and the future value of the land," a spokesperson for Hyundai was quoted by The Journal.
Hyundai will not only commission its headquarters at the Gangnam site, but also plans on building a Hyundai-themed park and a hotel as well. Gangnam is a wealthy area of Seoul, an equivalent of California's Beverly Hills. It was made famous by Korean artist Psy in his blockbuster song "Gangnam Style".
Though this seemed like a win for Hyundai, its investors weren't very happy with the deal.
"The bid price is nonsense. I was stunned," Kim Sung-soo, a fund manager at LS Asset Management and an investor in the bidding consortium, told Reuters.
"Even taking into account competition with Samsung, the bid price is excessive," Kim added noting that building expenses would cost another $6 billion.
"This deal is going to take a huge chunk out of Hyundai's vault, and dipping their hands into a cash stash that could have otherwise been used for higher dividend payouts and R&D is going to aggravate many investors, especially foreigners," Ko Tae-bong, auto analyst at HI Investment & Securities, told the agency.
In its defence, Hyundai said this was a strategically reviewed deal.
"In order to achieve production capacity of 10 million cars and bolster brand value that befits a global top-five company, we need a global business centre. The bid is the result of comprehensively reviewing its value as a symbol of the group's second growth phase," a Hyundai spokesman said.
Some analysts say that though the price looks too high, it depends on Hyundai how it will develop the site.
"It will be an unprecedented commercial site deal in Korea," Lim Hyun Moon, head of real estate at Shinhan Bank in Seoul, told Bloomberg in a telephone interview. "The price looks a bit high considering its appraisal price. It remains to be seen how Hyundai will justify its offer."
