SOUTH KOREA Law and Practice Contributed by: Hyeon Kang, Tae Kyoon Kim, Seungil Hong and Sung-Ho Moon, Bae, Kim & Lee LLC
1. General 1.1 Main Sources of Law The main sources of real estate law are as fol - lows: • the Civil Code; • the Real Estate Registration Act (RERA); • the National Land Planning and Utilisation Act (NLPUA); • the Report of Real Estate Transaction Act (RRETA); • the Building Act; • the Housing Lease Protection Act (HLPA); and • the Commercial Building Lease Protection Act (CBLPA). 1.2 Main Market Trends and Deals Over the past 12 months, investments in the Korean real estate market slowed down due to high inflation rates, causing increased uncertain - ty in the financial market. The Bank of Korea’s benchmark interest rate, which was continuous - ly raised to 3.5% in January 2023, is expected to remain unchanged until the first half of 2024. Commercial real estate transactions remained at around 65% of the previous year’s level, with an overall decrease in the office and logistics markets and a decrease of around almost 60% in the retail and hotel markets. Considering the timing of the U.S. Federal Reserve’s interest rate cut, many financial insti - tutions are expecting its cut in the second half of 2024. Thus, the commercial real estate invest - ment market in the second half of 2024 could be more active than last year. The highest transaction among the top 10 com - mercial real estate deals in 2023 by value was the purchase of a water treatment plant from SK
Hynix by SK REIT. The SK hynix water treatment plant is located in Icheon-si, Gyeonggi-do, with a land area of 46,144 m² and a gross floor area of 146,714 m². SK REIT acquired the property through its subsidiary REIT in Sepetember 2023. The transaction amounted to about KRW1.12 trillion. Blackstone, a global private equity fund (PEF) management company, completed the sale of Ark Place, a large office building in Gangnam, Seoul, at the end of March 2024. It has exited the property after more than eight years since its purchase in 2016. The sale price was approxi - mately KRW800 billion, making it the largest largest office building transaction in a year. Ark Place has a land area of 4171.7 m², a gross floor area of 62,725.31m², six basement floors and 24 upper floors. With a GFA of 53.17% and a floor area ratio of 980.53%, it is considered a landmark in the Gangnam Yeoksam Station area. A recent trend has seen the introduction of new business models that leverage blockchain and other disruptive technologies, such as digital asset-backed securities (DABS) offered with real estate as the underlying asset. The Korean gov - ernment has been supportive of new technolo - gies and has exempted the application of current regulations to business models designated as an innovative financial service under a “regulatory sandbox” regime. Since 2019, several real estate investment plat - forms have been admitted to the regulatory sandbox, enabling them to offer trust interests backed by commercial buildings. This allows investors to trade on the platform while record - ing the transactions on a blockchain, without being subject to securities regulations. The regu - latory sandbox provides a transitional exemption
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