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San Francisco Tower Sells to Korean Group in Biggest City Deal Since 2007

by on June 11, 2010

By Dan Levy, Dakin Campbell and Saeromi Shin June 12 (Bloomberg) — A San Francisco office tower occupied by Wells Fargo & Co. sold for $333 million to a group of South Korean investors in the city’s biggest commercial property deal in three years. Korean Teachers’ Credit Union and Korean Federation of Community Credit Cooperatives were among the buyers of 333 Market Street, a 33-story building in the city’s financial district, the teachers union said in an e-mailed statement. The purchasers paid about $507 a square foot, said Goodwin Gaw , a Hong Kong-based developer who helped broker the deal and will manage the tower. The sale closed June 10. The seller was Des Moines, Iowa-based insurer Principal Financial Group Inc. , which bought the tower from Wells Fargo for $370 million in 2006 before a collapse in commercial property values. The last single San Francisco office building to change hands for a comparable price was 650 California St., which sold for $300 million in July 2007, according to broker Jones Lang LaSalle Inc. “A Market Street high-rise combined with a long-term lease with Wells Fargo makes this an extremely attractive asset,” said Daniel Cressman , executive vice president at Grubb & Ellis Co. in San Francisco. “It shows you how well-located, well- leased assets hold value even in difficult times.” San Francisco-based Wells Fargo occupies 100 percent of the rentable space and has a lease that runs to 2026. The bank owns its headquarters at 420 Montgomery Street. Paula Chizek, a spokeswoman for Principal Financial, confirmed the Market Street building was for sale and declined to comment further. Plunge in Values U.S. commercial real estate values were down 42 percent in March from the October 2007 peak, according to the Moody’s/REAL Commercial Property Price Index . Retail and office properties in the biggest metropolitan areas led the decline, Moody’s said May 19. Prime office rents in San Francisco fell to $30.48 a square foot in the first quarter from $38.80 a year earlier, according to Colliers International, a Seattle-based brokerage. The vacancy rate for the highest-quality, best-located offices, known as Class A space, rose to 14.5 percent from 12.8 percent. Tenants including Del Monte Foods Co., Brown & Toland Medical Group and Credit Suisse Group AG took advantage of low rates in the fourth quarter and leased about 1 million square feet of office space, said Tove Nilsen, research director for Colliers International in San Francisco. South Korean Funds The 657,115-square-foot Market Street high-rise is expected to provide “stable cash flow,” the South Korean funds said in the statement. South Korean pension funds also agreed to buy Berlin’s Sony Center from a Morgan Stanley real-estate fund in April for about $768 million and purchased two buildings in Tokyo and Yokohama, Japan this month for $116 million. Wells Fargo, the biggest U.S. commercial property lender, will provide a $200 million loan to the buyers, according to Gaw. The purchasers are paying an interest rate of 4.5 percent on the loan, he said. The capitalization rate for the transaction is close to 7 percent, Gaw said. The rate, a measure of real estate returns, is derived by dividing net operating income from the property by its purchase price. Gaw’s Los Angeles-based Downtown Properties LLC owns the Roosevelt Hotel and Bradbury Building in Los Angeles and has operated offices, hotels and golf courses in Los Angeles, New York, San Francisco and Hawaii, according to its website. He bought San Francisco’s 550 Montgomery St., a Class B office building built in 1908, for $12.65 million, or $134 a square foot, in February, according to Colliers. To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net ; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net ; Saeromi Shin in Seoul at sshin15@bloomberg.net .

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San Francisco Tower Sells to Korean Group in Biggest City Deal Since 2007

Bank of Korea’s Lee, Under Pressure at Final Meeting, May Keep Rate at 2%

by on March 9, 2010

By Saeromi Shin and Cesilia Han March 10 (Bloomberg) — Bank of Korea Governor Lee Seong Tae will probably keep interest rates unchanged at his final meeting as he faces “intense” political pressure to spur investment and cut unemployment. Lee will hold the seven-day repurchase rate at a record-low 2 percent when his board meets at 9 a.m. tomorrow in Seoul, 13 of 14 economists surveyed by Bloomberg News say. One expects a quarter-point increase. Finance Minister Yoon Jeung Hyun said this week now “is not the right time” to boost borrowing costs. The government wants Lee, whose term expires March 31, to hold down rates as the economy shows mixed signs: growth slowed in the fourth quarter and unemployment soared in January, while exports have risen for four months and manufacturers’ confidence is at a seven-year high. To reinforce its stance, the government has sent a vice finance minister to the past two policy meetings. “Political pressures remain intense,” said Kevin Grice , an economist at Capital Economics Ltd. in London. “While there is an outside chance that rates will move up, it is most likely” they will remain on hold, he said. Governor Lee’s successor and replacements for two other Monetary Policy Committee members “will probably be sympathetic to the government view” and the first rate increase is unlikely before the third quarter, Grice said. President Lee Myung Bak is considering five candidates to head the Bank of Korea, DongA Ilbo newspaper reported last month, citing unidentified central bank and government officials. Possible Successors These include Euh Yoon Dae , head of a presidential council set up to promote South Korea internationally; ex-Finance Minister Kang Man Soo ; Kim Jong Chang , head of the Financial Supervisory Service; Park Cheul , a former deputy governor of the central bank; and Kim Choong Soo, envoy to the Organization for Economic Cooperation and Development, according to the newspaper. The failure to announce Governor Lee’s replacement three weeks before his term expires hasn’t spooked the markets. The benchmark Kospi stock index has risen more than 5 percent in the past month and the won gained 2.6 percent over the same period. Finance Minister Yoon told reporters on March 8 that “it is the government’s firm belief that it is not the right time for rate hikes” as business investment is weak and prices are at manageable levels. Lee Sung Kwon , an economist at Shinhan Investment Corp. in Seoul, said policy makers may also hold off on a rate increase tomorrow as “concerns over tightening measures in China remain.” China Tightening China, South Korea’s biggest export market, in February ordered banks to set aside more deposits as reserves for the second time in a month to avert asset bubbles. In the fourth quarter, Chinese gross domestic product increased 10.7 percent from a year earlier, the fastest pace since 2007. In contrast, South Korea’s economy expanded 0.2 percent in the fourth quarter and unemployment surged to a 10-year high of 4.8 percent in January. President Lee has put unemployment at the top of the political agenda, vowing to cut the average jobless rate to about 3 percent this year. The government boosted this year’s budget by 3 percent to 292.8 trillion won ($258 billion) and will accelerate distribution of funds as it seeks to maintain the recovery. The central bank said the slowdown in growth in the fourth quarter was a temporary adjustment. In November, it widened the annual inflation target range to between 2 percent and 4 percent. Consumer prices increased 2.7 percent in February. Exports Surge Asia’s fourth-largest economy is showing signs of strengthening. Exports climbed 31 percent in February from a year earlier, the fourth monthly increase. Samsung Electronics Co. , the world’s second-largest mobile-phone maker, said its handset shipments may expand about a fifth this year, helped by demand for smartphones. Manufacturers’ confidence for March rose to the highest level since the fourth quarter of 2002, when the Bank of Korea published its confidence survey on a quarterly basis. The central bank’s failure to raise rates last year confounded analysts, who forecast it to be one of the first in Asia to move after the economy expanded 3.2 percent in the third quarter, the fastest pace in seven years. Since then, Australia, China, India and Vietnam have tightened monetary policy as Asia leads the recovery from the global recession. Tim Condon , head of Asia research at ING Groep NV in Singapore, says Governor Lee may use his last meeting to boost borrowing costs. “South Korea’s economy has staged a vigorous, self- sustaining recovery and the Bank of Korea can begin to normalize its policy rate,” said Condon, who forecasts a quarter-point increase tomorrow and expects the rate to rise to 3.25 percent by year’s end. “Rising property prices could become an issue if record-low financing conditions persist for too long.” To contact the reporters on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net ; Cesilia Han in Seoul at chan4@bloomberg.net

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Bank of Korea’s Lee, Under Pressure at Final Meeting, May Keep Rate at 2%

Asian Stocks, Euro Advance; Bond Risk Falls as Economic Outlook Improves

March 7, 2010

By Linus Chua and Saeromi Shin March 8 (Bloomberg) — Asian stocks rose to a six-week high, the euro strengthened and concerns about defaults receded as French President Nicolas Sarkozy pledged support for Greece and government reports showed economic growth accelerating. The MSCI Asia Pacific Index climbed 1.6 percent to 122.20 as of 12:50 p.m. in Tokyo with seven stocks rising for every one that fell. The cost of protecting Asian bonds from default dropped to the lowest in seven weeks and the euro advanced to a two-week high against the yen. Standard & Poor’s 500 Index futures added 0.2 percent. Markets rallied after Sarkozy said yesterday the euro region is ready to rescue Greece should the government struggle to fund its budget deficit, and a March 5 U.S. report showed fewer job losses than economists forecast. New Zealand manufacturing sales increased the most in more than seven years during the fourth quarter and Japan posted a current-account surplus in January as exports climbed for a second month. “Investors are starting to see what they really wanted to see and the negatives are in the process of being priced in as the Euro zone will promise support,” said Chu Moon Sung , a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages $26 billion. “The better-than-expected U.S. jobs report also boosted overall investors’ optimism.” Hang Seng Leads Hong Kong’s Hang Seng Index rose 1.9 percent. Japan’s Nikkei 225 Stock Average increased 1.7 percent, South Korea’s Kospi Index climbed 1.2 percent. Sony Corp. , which gets almost a quarter of its sales in the U.S., jumped 3.6 percent. Nissan Motor Co. , which gets more than a third of its revenue in North America, advanced 4 percent. BHP Billiton Ltd. , the world’s largest mining company, rose 2.5 percent after winning a 55 percent price increase in coking coal from JFE Holdings Inc.’s steel unit. Arrow Energy Ltd. soared 47 percent after the Australian coal-seam gas producer said it received a takeover offer worth more than A$3.3 billion ($3 billion) from an entity formed by Royal Dutch Shell Plc and PetroChina Co. S&P 500 futures for delivery this month rose to 1,137.60. Last week’s 3.1 percent rally in the U.S. benchmark erased this year’s loss. The measure is up 2.1 percent in 2010. Nonfarm payrolls declined by 36,000 in February compared to 68,000, the average estimate of 82 economists surveyed by Bloomberg. The Markit iTraxx Asia index of 50 investment-grade borrowers outside Japan dropped 4 basis points to 98 basis points, Royal Bank of Scotland Group Plc prices show. That’s the lowest since Jan. 19, according to CMA DataVision. The Markit CDX North America Investment-Grade Index, linked to credit-default swaps on 125 companies, dropped 6 basis points last week to 85.4 basis points, the lowest since Jan. 20, CMA DataVision prices show. ‘Positive Sentiment’ “The overall positive sentiment is being driven by concrete evidence that the U.S. economic recovery has traction,” said Geoffrey Ng , who manages $1 billion as chief executive officer at HLG Asset Management Sdn. in Kuala Lumpur. “This further supports the view that Asia’s growth is sustainable, both from the domestic and export fronts.” The 16-nation euro rose to as high as 123.72 yen, the strongest level since Feb. 23, from 123.00 yen in New York on March 5. The euro rose to $1.3666 from $1.3626. Sarkozy ’s pledge is among the strongest by a European Union leader to signal the bloc would bail out Greece. Treasury yields were at the highest level in a week. “We are seeing a classic reversal of the yen, having been the preeminent safe-haven currency in recent weeks,” said Ray Attrill , global research director at Forecast Ltd. in Sydney. Emerging Markets The Malaysian ringgit rose 0.5 percent to 3.3470 per dollar, reaching its strongest level in almost seven weeks, after January exports rose the most in 11 years. South Korea’s won climbed 0.6 percent to 1,133.7. Copper for three-month delivery gained 0.4 percent to $7,575 a metric ton, extending its 2 percent increase on Friday. The Baltic Dry Index , a measure of shipping costs for commodities, jumped 3.9 percent on Friday to 3,242, the highest level since Jan. 18. Crude oil rose for a second day on speculation improving world demand and OPEC supply restrictions will help slow growth in stockpiles. Oil rose 0.6 percent to $81.96 a barrel in New York ahead of a report tomorrow in the U.S., the world’s largest oil consumer, that will probably show consumer confidence is at its highest in a month, according to a Bloomberg News survey of economists. To contact the reporters for this story: Linus Chua at lchua@bloomberg.net ; Saeromi Shin in Seoul at sshin15@bloomberg.net .

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Euro Falls, Asian Stocks Drop on Possible Greece Downgrade; Oil Pares Gain

February 24, 2010

By Linus Chua and Saeromi Shin Feb. 25 (Bloomberg) — The euro fell to a one-year low against the yen and Asian stocks declined for a second day after Standard & Poor’s said it may downgrade Greece’s credit rating again. Oil and copper pared earlier gains. The euro dropped to 120.68 yen as of 1:35 p.m. in Tokyo from 122.03 yen yesterday, after earlier dropping to 120.62, the weakest level since Feb. 24, 2009. The MSCI Asia Pacific Index lost 0.8 percent to 116.74 and S&P 500 futures slid 0.7 percent. S&P’s warning raises concerns that Greece’s fiscal woes may spread to other nations and extend losses in the euro, which has fallen 8.3 percent against the yen in the past two months. Federal Reserve Chairman Ben S. Bernanke said yesterday the U.S. economy is in a “nascent” recovery that still requires low interest rates. “The impact of the Greece issue should be felt even stronger if there are signs of bumps to the global recovery,” Kim Yong Tae , a Seoul-based fund manager at Yurie Asset Management, which manage $3 billion. “If another downgrade comes, I think that should affect markets in the short term and raise concern about other struggling countries in the region.” The euro dropped against 11 of its 16 major counterparts as S&P raised concerns the weak Greek economy and political opposition threaten the nation’s ability to reduce the European Union’s largest budget deficit. The euro fell to $1.3469 from $1.3538 in New York yesterday. It touched $1.3444 on Feb. 19, the lowest since May 18. Dollar Gains The dollar has risen 2.7 percent versus the euro this month, heading for a third monthly gain, its longest stretch since November 2008. The Philippine peso declined 0.2 percent to 46.252 per dollar as S&P’s warning damped appetite for emerging-market currencies. South Korea’s won weakened 0.2 percent to 1,155.65 per dollar on concern exports haven’t fully recovered as the nation posted its first current-account deficit in a year. The current-account gap reached $448 million in January from a $1.52 billion surplus in December, the Bank of Korea said. The Kospi index lost 1.3 percent. Goodman Fielder Ltd. , Australia’s largest baker, slumped 4.5 percent after first-half earnings missed analyst estimates. Toll Holdings Ltd. shares tumbled 16 percent after the air- freight and logistics company reported lower profit. ‘Too Optimistic’ Asian stocks outside of Japan may fall 12 percent this year because valuations have become too expensive and as developed economies such as the U.S. recover at a faster pace, Royal Bank of Scotland Group Plc said. China , India and Indonesia are among “overpriced” and “over-owned” markets that may fall even further, Emil Wolter , Singapore-based head of Asian regional strategy at RBS, said in a Bloomberg Television interview today. They are also among markets that may face greater risks as governments exit their monetary and fiscal stimulus, he said. “Initially we started the year with an expectation of a modest 3 percent absolute return gain, but I think at this point that’s proven to be a little too optimistic,” Wolter said. Crude oil pared gains, dropping below $80 a barrel as the dollar rose against the euro. Copper for three-month delivery was little changed at $7,145 a metric ton after erasing a gain of as much as 1.2 percent on concern Standard & Poor’s may lower Greece’s credit rating again by the end of March. Aluminum was little changed at $2,135 a ton. Zinc was up 0.3 percent at $2,210 a ton, trimming an increase of as much as 2.1 percent. To contact the reporters for this story: Linus Chua in at lchua@bloomberg.net ; Saeromi Shin in Seoul at sshin15@bloomberg.net

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Korea Electric, Doosan Jump After Winning $20 Billion U.A.E. Nuclear Order

December 27, 2009

By Saeromi Shin Dec. 28 (Bloomberg) — Korea Electric Power Corp. , Doosan Heavy Industries & Construction Co. and other South Korean builders jumped the most in a year after winning a $20 billion nuclear-plant contract from the United Arab Emirates, the first such order awarded by a Gulf Arab nation. Korea Electric gained 11 percent to 36,500 won as of 9:19 a.m. on the Korea Exchange, while Doosan Heavy climbed the daily limit of 15 percent to 84,900 won. Both rose by the most since Dec. 8, 2008. The benchmark Kospi stock index advanced 0.7 percent. A Korea Electric-led group, which also includes Hyundai Engineering & Construction Co. and Samsung C&T Corp., will design, build and help operate four 1,400-megawatt nuclear power units to be completed from 2017 to 2020, Emirates Nuclear Energy Corp. said yesterday in an e-mailed statement. The order is part of a “fleet of power plants” the U.A.E. wants to build, Chief Executive Officer Mohammed al-Hammadi said. “This industry has just started to grow, and there’s strong growth potential for the next two decades,” said Lee Jin Woo , a fund manager at KTB Asset Management Co. in Seoul, which manages the equivalent of $8.5 billion. “There are expectations for winning additional orders.” Hyundai Engineering rose 9.4 percent to 74,400 won, while Samsung C&T gained 8.6 percent to 58,000 won. Both stocks advanced the most since Dec. 15, 2008. To contact the reporter on this story: Saeromi Shin in Seoul at sshin15@bloomberg.net .

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Hynix Semiconductor Lenders Plan to Accept Bids for Their Stake by January

December 19, 2009

By Kevin Cho and Saeromi Shin Dec. 20 (Bloomberg) — Hynix Semiconductor Inc. creditors will accept letters of intent from potential bidders for their controlling stake in the world’s second-largest maker of computer-memory chips by Jan. 29. The sale arrangers will send out notices to domestic companies tomorrow, Korea Exchange Bank, the South Korean chipmaker’s main lender, said in a statement today. Creditors of Hynix plan to sell all or part of their 28 percent stake, valued at about 3.6 trillion won ($3.1 billion) based on Hynix’s closing price on Dec. 18, Korea Exchange Bank said. Creditors are trying to sell Hynix for a second time after Hyosung Corp. dropped its bid in November because of speculation that it received political favors to pursue the takeover. Korea Exchange Bank said last month creditors will resume their search for a domestic buyer as they try to recoup the $4.6 billion spent bailing out the chipmaker. “The industry outlook has turned more positive, and there may be more interest than before,” said Kim Young Joon, head of equities at NH-CA Asset Management Co. in Seoul, which manages the equivalent to $8.5 billion in assets. “Even if only part of the stake is sold, I think decision-making process will get better than under the current ownership, comprised of financial companies.” Right Timing Hynix may be able to repay about 1 trillion won in debt in 2010 and is still seen capable of investing about 2.3 trillion won, which should help the company widen the gap with its rivals, Korea Exchange Bank said. The Korean chipmaker said in October its spending budget for next year will be more than 1.5 trillion won, compared with about 1 trillion won in 2009. “Now is the right time for Hynix’s acquisition and we hope many companies will participate in the sale,” Korea Exchange Bank said in the statement. Sale arrangers Credit Suisse Group AG, Korea Development Bank and Woori Investment & Securities Co. said Nov. 16 it was the “right timing” to try to revive the sale because of the recovery in the industry. Hynix reported its first quarterly profit in two years in the third quarter on higher prices after an industrywide production cut helped ease a glut. The price of the benchmark dynamic random access memory chip, which temporarily holds data and helps computer processors run multiple programs simultaneously, has more than tripled this year after falling 62 percent in 2008, according to Dramexchange Technology Inc. , operator of Asia’s biggest spot market for semiconductors. Korea Exchange Bank owns 6.4 percent of Hynix , while Woori Bank has 6.3 percent and Korea Development Bank holds 4.8 percent. Six other financial companies own the remainder. Hynix shares have more than tripled this year, compared with a 46 percent gain in the benchmark Kospi stock index. To contact the reporters on this story: Kevin Cho in Seoul at kcho2@bloomberg.net Saeromi Shin in Seoul at sshin15@bloomberg.net

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