South Korean investors have typically been one of the major foreign-capital sources into U.S. commercial real estate, but they’ve appeared to have a change of heart in the past year. During the 12 months ending in second-quarter 2023, the aggregate dollar volume of their deals ($549 million) fell by 92%, according to MSCI Real Assets.
The lower level of activity was a dramatic change from 2021 when South Korea accounted for $5.83 billion in U.S. direct acquisition volume. The recent pullback resulted in South Korea plunging on the list of the top countries for capital into the U.S., from No. 3 in 2021 to No. 11 as of midyear 2023, according to MSCI.
In recent times, South Korean corporate investors have been more interested in selling than buying. According to MSCI data, the automaker Hyundai Motor Group ranked No. 20 on the list of top cross-border buyers but was credited with purchasing only a single property during the year ending in June 2023. In the same time frame, Korea Investment Holdings ranked No. 11 among the top sellers after jettisoning seven assets totaling about $1 billion in value.
These numbers, however, are only a small part of the story of South Korea’s recent activity in America. Some of the East Asian economic powerhouse’s largest corporations have committed to making major investments in the U.S. industrial sector now and into the future. That includes a strong focus on electric vehicle (EV) batteries and other cutting-edge technology.
The largest deal announced of late is SK Group’s plan to invest $22 billion in American manufacturing facilities in the coming years. One of South Korea’s largest conglomerates, SK Group has diversified operations across the U.S. that produce everything from pharmaceuticals to EV batteries. It currently employs more than 6,000 people in America with plans to grow its headcount to 20,000 people by the end of 2025.
This year, SK Group subsidiary SK Signet opened a new EV charging plant in Plano, Texas. The facility will have the capacity to produce more than 10,000 ultra-fast chargers each year. A separate SK Group subsidiary is teaming with Hyundai to build an EV battery cell plant in Bartow County, Georgia. This will be SK Group’s third EV battery-making facility in Georgia. Yet another SK Group subsidiary has made agreements with Avis Budget Group to install EV charging stations at the George Bush Intercontinental Airport in Houston. SK Inc. and SK Energy have expanded their presence in North Carolina, adding a second office in the Charlotte area along with a new research and development facility in Raleigh.
Hyundai announced in May 2022 that it would invest $5 billion in the U.S. by 2025 to develop mobility solutions such as artificial intelligence, autonomous driving and robotics. In December 2020, Hyundai made a deal with Japanese investment giant Softbank for an 80% stake in robot maker Boston Dynamics, which is best known for Spot, a robotic dog that can walk on its four legs.
Not to be left out of the EV movement, Samsung announced a $3 billion joint venture with General Motors this past April to develop an EV battery plant in the U.S. The location hasn’t been decided yet, but the plant is expected to open in 2026. Last year, LG Energy Solution, another South Korean industrial power, announced a joint venture with General Motors known as Ultium Cells. The companies are building EV battery plants in Michigan, Ohio and Tennessee. The U.S. Department of Energy provided a $2.5 billion loan to fund the project, which is expected to create 5,100 long-term jobs. ●
