Investing in office buildings: How Korean celebs make their fortunes grow

After tasting fame and money, actors and singers in South Korea often take a similar path when it comes to asset management. Investing in office buildings in Seoul is a typical strategy for them in this ultralow interest environment, according to market watchers.

Many celebrities have beefed up their real estate portfolios -- acquiring expensive residential properties to rent out, but also increasingly turning to commercial properties -- to boost their already substantial income and secure long-term wealth, they added.

What makes the multibillion won deals possible is their VIP status in banks, which willingly extend large loans. Entertainment moguls tend to get roughly 60 percent to 80 percent of the purchasing price.

Yuri of Girls’ Generation had only 2.4 billion won ($2.16 million) in cash but got a 10.5 billion won loan to buy a five-story building in Nonhyeon-dong, a posh district in southern Seoul, last July.

A multibillion won loan is out of reach for an ordinary salaried worker, but celebrities’ sizable income and savings give them high credit scores. A-listers can use the rent they bring in to pay interest on their loans.

“Banks usually review by whom and how the building is going to be used. Celebrities usually purchase facilities for rentals, which puts them in a favorable situation in getting loan approval,” said a bank official who requested anonymity. But that doesn’t mean they get preferential treatment, he added.

Other common factors observed when Korean stars purchase buildings is that they tend to prefer commercial units with Starbucks locations. 

Actor Ha Jung-woo has owned three commercial buildings, all of which had Starbucks as a tenant. 

One of these buildings -- in Hwagok-dong, western Seoul -- houses a Starbucks branch under a long-term lease that expires in 2031.

He bought the building for 7.3 billion won in July 2018 and sold it for 11.9 billion won this past March, turning over a profit of some 4.6 billion won.

A boom in the real estate market in recent years and the contract with Starbucks appear to have raised the value of the building, according to market experts.

Hallyu star Song Seung-heun took a similar path.

Song brought the US coffee chain into his newly renovated building near Sinsa Station in Gangnam in 2016. Since then the value of his property has risen rapidly.

In 2006, he purchased the four-story property for 11.4 billion won. Its estimated market price is 30 billion won, according to a report by local news outlet Aju News.

According to data released by the National Tax Service in 2018, singers, actors and models had the highest average annual pay in the showbiz industry, in that order. The highest-paid singers earned an average of 3.4 billion won a year, whereas the highest-paid actors brought in an average of 1.7 billion won. Models earned roughly 500 million won a year.

By Park Jun-hee (junheee@heraldcorp.com)