State firms put buildings on sale

By Seo Jee-yeon

Debt-ridden organizations told to speed up selling off their Seoul offices

  • Published : Feb 3, 2014 - 20:04
  • Updated : Feb 3, 2014 - 20:04
This year may become a great year for office building buyers, as public organizations located in Seoul and its adjacent areas rush to sell their office buildings, pressed by the government’s demands to lower their debt levels.

“Plans for selling off office buildings is one of the key measures that the 41 public organizations vowed to take to cut their debt and normalize their businesses,” said an official from the Ministry of Strategy and Finance, declining to be identified.

At the request of the ministry, a total of 41 public organizations, including 18 heavy debt-laden state-owned enterprises like Korea Land and Housing Corp. and Korea Electric Power Corp., submitted debt reduction plans on Sunday.

Besides selling off real estate ― an “emergency” measure taken every time public entities come under fire for poor finances ― other debt reduction plans included raising capital from selling off noncore assets overseas and cutting expenses such as welfare and executive salaries.

The ministry said that if the debt reduction plans are implemented as planned, about 40 trillion won ($42.8 billion) in debts will be removed from the companies’ books so that ultimately, the overall debt ratio for the 41 firms would fall to 197 percent by 2017 from the current 220 percent.

“As the ministry will check up on the implementation progress on a regular basis, many public organizations will speed up sales of their office buildings, ahead of sales of noncore assets overseas that require a longer time frame,’’ an official from the Korea Electric Power Corp. said.

The ministry’s first progress checkup is slated for September. The tight deadline is because lowering the debt level of public organizations is considered key to the government’s initiative for normalizing the local economy over the next three years.

The rush to sell real estate, however, is now triggering a fresh debate over whether the move is actually doing a favor for local conglomerates.

This is because due to the high prices, industry watchers believe only local conglomerates or foreign funds would be able to bid for pricy office buildings in Seoul.

For example, there were news reports that Hyundai Motor Group recently expressed its intention to acquire an office building and other properties, owned by KEPCO for the relocation of the group’s headquarters.

The value of KEPCO’s property, stretching over an 80,000-square-meter site in Samseong-dong, southern Seoul, is estimated at around 2 trillion won.

Civic groups claimed that benefits from the sales of public properties should be returned to citizens, not big companies.

On the other hand, the Transport Ministry forecast that about 7 trillion won would be secured by selling office buildings of 51 public organizations in the capital area, which plan to relocate out of Seoul by 2015 for balanced regional development.

By Seo Jee-yeon (