월스트리트저널수요일, 7. 8월 2013, 11:50:00 KST

Koreans Look to the U.S. for Real Estate

MAURA WEBBER SADOVI

Nicholas Waring

The Washington Harbour mixed-use complex was recently acquired by South Korean investors.

North Korean leader Kim Jong Un may unwittingly be playing a bit part in some of this year's bigger real-estate deals.

Take the recent sale of Washington Harbour, a mixed-use Washington complex on the banks of the Potomac River in the capital's elegant Georgetown neighborhood. The property was acquired last month for $373 million by a group of South Korean investors via a unit of Principal Financial Group PFG -0.96% .

The seller was a venture of Rockpoint Group, a private Boston real-estate-investment firm.

The deal came together in the spring as rising tensions between North and South Korea flared. In March, North Korea's saber rattling escalated as it declared invalid the Korean War Armistice. The U.S. and South Korea have had strained relations for decades with North Korea and some played down the moves by Kim Jong Un as a calculated attempt to prove himself as a new leader.

But the situation may have spooked investors in South Korea, who are moving billions of dollars into real estate outside of the region. Traditionally, turmoil in Asia, the Middle East and elsewhere prompts investors to buy properties and businesses in the U.S., Canada and Europe, which are typically perceived to be more stable and safe from major political unrest.

Real-estate-services firm Jones Lang LaSalle JLL -1.30% says that world-wide, South Koreans have spent $5.4 billion on real estate outside their home market in the first half of this year, already more than double the $2 billion spent the previous year. This is a record since JLL began keeping records in 2006.

So far this year, South Korea has become the biggest foreign investor in real estate world-wide, followed by Canada and Singapore respectively, according to JLL. Year to date, South Koreans are the fourth-biggest real-estate investors in the U.S., according to Real Capital Analytics, a New York real-estate-research firm.

"There's a mix of reasons, but with the whole blowup between North and South Korea…they started to put their money down," said Steve Collins, international director with JLL.

Real-estate professionals say South Koreans first began buying glitzy offshore properties several years ago after restrictions on South Korean pension funds investing abroad eased. But the buying has accelerated.

This spring saw a string of U.S. property purchases by South Koreans, accounting for 39% of South Korea's capital outflow into global real estate, according to JLL.

For example, Mirae Asset Global Investments Co., a South Korean financial-services firm, paid $218 million for an office tower in Chicago, and JLL said South Korean investors were part of a group that agreed to acquire a Houston office tower.

South Korean investors first gained notice when they bought a number of high-profile properties in Europe and Australia immediately after the financial crisis.

In 2009, the National Pension Service of South Korea, one of the world's largest pension funds, paid more than $1 billion for HSBC Holdings PLC's office tower in London and bought the Sony Center in Berlin in 2010.

The Washington Harbour deal reflects a South Korean taste for upscale properties with strong cash flows. The 1980s-era property has been compared to a sand castle because of its curvy design that overlooks the river. It has an outdoor skating rink. It was designed by Arthur Cotton Moore, who is known for his renovation of part of the Library of Congress.

Its 558,000-square-feet of office and retail space are 96% occupied through long-term leases to such tenants as law firm Foley & Lardner LLP and restaurants like Tony & Joe's Seafood Place. It is expected to yield a return of about 5.5%. HFF Inc. marketed the property for the seller.

Some analysts are watching to see if the South Koreans can sustain this pace.

Troy Stangarone, senior director at the Korea Economic Institute of America, a Washington think tank, expects South Korean investors to remain a force in the global property market.

He sees a push to invest abroad as part of a longer-term structural shift for South Koreans now ramping up as world economies stabilize following the financial crisis.

But others say rising interest rates and an easing of tensions at home could reduce the South Korean appetite for foreign real estate. "If tensions ease in northeast Asia, obviously the risk premium goes down," said Dan Fasulo, a managing director at Real Capital.

Write to Maura Webber Sadovi at maura.sadovi@wsj.com

A version of this article appeared August 7, 2013, on page C6 in the U.S. edition of The Wall Street Journal, with the headline: Koreans Look to the West.

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