CORFAC News

In the overseas real estate investment market, which has been led by institutional investors, it is somewhat unusual for individuals to buy small- and medium-sized buildings instead of homes. Additionally, there have been few reliable overseas small- and medium-sized consulting companies available to help facilitate these types of sales.

That changed in December 2017 when an individual investor in Korea bought an eight-story building (1,500 square meters in total area) in Nihonbashi, Tokyo, for about 13 billion won ($12 million USD). The purchase was made with the advice of Woori Bank Investment Advisory Center and Global PMC/CORFAC International, a real estate investment advisory firm headquartered in Seoul, South Korea.

The return on investment is 4.25 percent per annum. Since the investor borrowed 8 billion won ($7.5 million USD) of the mortgage loan from the purchase proceeds with a low 0.96 percent, the return on equity (ROE) is 8.38%. The high yield was due to the "leverage effect" because the lending rate was quite low.

Until now, individuals' overseas real estate investments have been made with the help of intermediaries such as REITs or indirect investment products such as funds, or with the help of acquaintances and brokers who live abroad, with investors taking full responsibility for all investment risks. Often there were cases where fraud was committed when investing through a local acquaintance without expertise. "Demand for overseas commercial building investment is increasing in Korea," said Yong-Nam KIM, CEO of Global PMC/CORFAC International, adding "We are seeking out commercial properties for individual customers to use them for branch offices in Japan and offices in Hawaii.”

Original reporting provided by the Korea Economic Daily, January 10, 2018, issue.