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| IFC Seoul on Yeouido / Courtesy of Mirae Asset Global Investments |
By Anna J. Park
Mirae Asset's plan to purchase International Finance Center (IFC) Seoul from Toronto-based Brookfield Asset Management has fallen apart, some four months after the two sides signed a memorandum of understanding (MOU) in May this year agreeing to a 4 trillion won ($2.79 billion) deal.
According to investment banking sources, Monday, Mirae Asset has filed a case with Singapore International Arbitration Centers (SIAC) to retrieve a 200 billion won deposit paid to Brookfield Asset under the MOU.
Originally, Mirae Asset was to raise about half of the 4 trillion won by establishing a real estate investment trust (REIT) but the plan had to be scrapped, as the Korean government brought a halt to its plans in August, owing to an excessive proportion of debt in the trust's structure.
Mirae Asset had been certain that it could recover the deposit money, as the terms and conditions of the memorandum stated that the deposit could be refunded in the event of the deal falling through due to a failure in creating the REIT. However, Brookfield refused to return the money, questioning whether Mirae Asset had conducted its "best efforts" to close the deal. This disagreement led the Korean company to file for arbitration on Monday.
Other unpredictable and unfavorable external market conditions, including the soaring won-dollar exchange rate as well as the U.S. Federal Reserve's giant steps to raise the key interest rate by 75 basis points three times in a row this year alone, all attributed to the deal falling through.
Unresolved issues of to which countries Brookfield should pay taxes related to the deal ― Mirae Asset asserted that taxes should be paid to Korea, while Brookfield argued that taxes could be paid only to Singapore ― were another stumbling block to the deal's implementation.
Deteriorated financial market conditions also made major institutional investors more risk-averse to alternative investments, making it more difficult for Mirae Asset to raise the capital necessary for the deal.
Last November, Brookfield Asset Management appointed Eastdil Secured, a top-tier global real estate investment banking company based in New York, to handle the sale. Brookfield purchased IFC Seoul ― a complex consisting of IFC Office Towers, IFC Mall and Conrad Seoul Hotel ― for 2.5 trillion won ($1.74 billion) in July 2016.
