Week of April 15, 2002
Snapshot from the Field
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First U.S.-S. Korean Real Estate JV
Gale Co. Tapped as JV Partner in $12.5B Korean 'Intelligent City'By JACK LYNE, Site Selection Executive Editor of Interactive Publishing
INCHEON, South Korea In the first-ever U.S.-South Korean real estate joint venture, The Gale Co. (www.galewent.com) has been tapped as a partner in developing the US$12.5-billion New Songdo Intelligent City. A massive public- and private-sector project focused on free trade and international business, the mixed-use Intelligent City will be built on South Korea's northwest tip on the Yellow Sea.
In addition to Gale Co., the joint venture includes POSCO Engineering & Construction, the South Korean government and Incheon- the city in which the multibillion project will be built. POSCO, Korea's largest steel producer, and Incheon jointly selected New York City-based Gale to join in the pact.
The agreement ranks as the largest international real estate investment in South Korea's history, according to Korean industry analysts. In that, the deal marks the most conspicuous payoff thus far from South Korea's 1998 reforms of its real estate investment laws. Those reforms were designed to encourage greater market participation from foreign firms. Until 1998, the Alien Land Acquisition Act prohibited foreign companies from owning Korean real estate.
"We believe that New Songdo Intelligent City will elevate the republic of Korea as a leader of world trade and business," Incheon Mayor Ki-Sun Choi said at the joint-venture signing. "We are very pleased to have developed what we see as an innovative private-sector partnership with the first-ever U.S.-Korean real estate joint venture of this kind. Together, government and the private sector hand in hand, we will make history and build one of the finest urban centers in the world."
1,400 Acres, $8 Billion
Of that total acreage, 1,000 acres (400 hectares) will include a World Trade Center, a convention hall, office towers, retail space, hotels, 15,000 residential units, two golf courses and a 60-acre (24-hectare) public central park.
The government of Incheon, a city some 18 miles (28 km.) west of Seoul, will handle construction in the project's other 400 acres (160 hectares). The city will build public improvements that will include streets, sidewalks, utilities and government buildings.
Those improvements are part of the considerable stake that Incheon and the South Korean government have in Songdo Intelligent City. With the joint-venture's signing, the city and the central government are committed to completing more than $8 billion in infrastructure improvements in Incheon's Songdo area.
One infrastructure centerpiece is already in place. The new Incheon International Airport opened in late March of 2001 and ranks as the world's second largest airport. Songdo Intelligent City will lie adjacent to Incheon International.
"To have the chance to build a new city next to one of the world's best-constructed airports is the chance of a lifetime and an opportunity to further build the commercial ties between the United States and South Korea," said Thomas P. O'Neill III, CEO of FH/GPC, the U.S.-based lobbying and consulting group that facilitated the joint-venture agreement. "The Songdo Intelligent City project is a unique business opportunity in the world."
Architect: 'The Model for Future Urban Development'The 1998 reforms that opened South Korea's gates to firms like Gale Co. were rooted in the nation's steep economic downturn. The International Monetary Fund, which had provided a $57-billion bailout, successfully pressured the government to increase market access and investment deregulation. Now, many South Korean officials see New Songdo Intelligent City as an essential building block in a long-lasting foundation for the nation's economic health.
Reclaimed land will make up most of the foundation on which the project will rise. The central and city governments have already combined to reclaim 4,000 acres (1,600 hectares) of marshland for the Intelligent City. Plans call for reclaiming another 6,000 acres (2,400 hectares). Gale Co.'s John B. Hynes III was bullish on South Korea's economic future in his remarks at the joint-venture signing.
"We are honored to have been selected by the city of Incheon and POSCO to jointly develop this new, world-class urban center. This agreement clearly reflects the confidence and optimism that our company holds for future growth potential in South Korea," said Hynes, a partner with Gale Co., formerly known as Gale & Wentworth.
Echoing that optimism was Gene Kohn, president of Kohn Pedersen Fox, tapped by the Gale Co. as the project's master-plan architect. "We are extremely proud to be joining this world-class team in what is destined to become the model for future urban development," Kohn said.
Tenant List Includes Cisco, HP, IntelSome other big business names seem to share that optimism.
More than 600 tenants have reportedly signed letters of intent to locate in Intelligent City. About 50 are foreign companies, including Cisco, Hewlett-Packard and Intel. Daewoo and Hyundai Electronics are among the biggest names among South Korean firms on the tenant list.
South Korea's labor force is one of the draws for such companies. Eighteen percent of the country's labor force hold college degrees, and 60 percent of high school graduates go on to colleges and universities.
©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.