Rodamco Asia N.V. today announced that it has signed a Sale and Purchase Agreement to acquire a partially constructed development project, tentatively named Rodamco Plaza, which is to be completed as a twin tower retail mall complex (148,800 sqm leasable area) in Buchon, Seoul, South Korea.
The total investment, including the cost to complete the project as a retail mall (completion expected by August 2003), is estimated at approximately KRW 181 billion (EUR 155 million).
The consideration for the existing structure is KRW 46 billion (EUR 39.3 million) which includes land and the entire 6-story steel structure. The remaining development costs including hard en soft construction costs, taxes, reserves, financing fees and interest are estimated to be KRW 135 billion (EUR 115.7 million). Of the total investment of KRW 181 billion (EUR 155 million), KRW 54 billion (EUR 46 million) will be financed internally. A local currency loan of approximately KRW 127 billion (EUR 109 million, 70% of project cost) will be funded by a Korean bank during the construction period. Upon completion, the construction loan will be paid down to KRW 55 billion (EUR 47 million) from tenant deposits.
Upon completion, in the first full year following project completion the net rental yield and net cash yield on invested equity are expected to be about 10% and 16% respectively. During the development phase RA will, in accordance with consistently applied accounting policies, capitalize interest on the equity invested in the project, at a rate of 8% p.a. As a result the net profit would increase by about EUR 1.7 million on an annual basis. For the year 2002 / 2003 this will amount to about EUR 1.3 million. After completion, the positive impact on net profit for the first full year of operation would be more than EUR 5 million, increasing to EUR 6 million in the second year of operation.
Rodamco Plaza consists of two retail towers (Tower A and Tower B) which are connected by footbridges. Tower A will be fully occupied by a department store (89,100 sm), while the top 3 floors of Tower B will have a multiplex cinema (14,700 sm). The remaining floors (45,000 sm) of Tower B will be leased to various specialty retailers and restaurants. The project is currently 70% pre-leased and strong interest has been received already for the remaining space. Rodamco Plaza has a total of 1,386 parking lots in the basements of the complex.
Rodamco Plaza is located in the commercial center of Buchon, which is approximately 30 km southwest from the Seoul CBD. As one of the most populous and fastest growing satellite cities of Seoul, Buchon is expected to have a population of over 1 million by next year. As Buchon is a relatively new suburb, its existing inventory of retail space is miniscule compared to other established suburbs such as Bundang and Ilsan, while the population profile shows that the percentage of families with children below 15 years old is 5-7% higher than SeoulÂ's. This age group is typically the potential major customer base for a retail center such as Rodamco Plaza.
The Buchon City Hall was recently relocated to an adjacent block and the area around Rodamco Plaza is now regarded as the center of Buchon. A subway station will be connected directly to Rodamco Plaza when subway services are extended to the area in few years time. Buchon is also known as the cinema town in Korea as it hosts the annual international film festivals and promotes film making throughout the city. Rodamco Plaza will house a state-of-art multiplex cinema facility, the shopping center is expected to be one of the main venues for future Buchon International Film Festivals.
Ton de Boer, Chief Executive Officer commented: 'The Central Bank of Korea predicts that South KoreaÂ's economy will grow by an impressive 5.7% this year, after the solid growth of 2.6% in 2001. We believe that this fourth investment in South Korea will be a very profitable one for Rodamco Asia and we are very pleased that after our investments in offices (Rodamco Tower and Joong Ang Building) and s