Hanwha Hotels & Resorts Co. is in talks to acquire Paraspara Seoul, a five-star hotel and resort, up for sale by a property developer facing liability over a fatal fire at the construction site of Banyan Tree hotel in Busan, according to sources in the hotel industry on Thursday.
In a deal estimated at around 200 billion won ($144 million), Hanwha expects the acquisition of the luxury hotel to strengthen its five-star hotel portfolio after its flagship hotel, The Plaza, near the Seoul City Hall, converted a portion of its guest rooms into office space last year.
Hanwha is seeking to acquire 100% of Paraspara Seoul through the purchase of its parent company Jungskngbukhansan, a property developer.
Jungskngbukhansan is, in turn, fully owned by Park Sang-chun, CEO of both Samjung Housing Co. and Samjung E&C Co.
Paraspara Seoul was put on the market after Samjung Housing filed for court-led rehabilitation in February, following a fire at the construction site of Banyan Tree Haeundae Busan, a new branch of Singapore’s luxury hotel and resort brand Banyan Tree.
The accident, which occured in February, left six dead and 27 injured.
The accident pushed the property developer into financial distress as Samjung Housing’s CEO Park was held liable for violations of the Serious Accidents Punishment Act and occupational negligence resulting in death as the contractor for the construction project.
Industry sources said Park has offered to sell Paraspara Seoul to cover 170 billion won in liabilities linked to the accident.
If the deal proceeds, Hanwha will assume the liabilities, rather than make a direct payment to the current owner.
“It appears the buyer opted to acquire the company’s liabilities rather than the property itself, likely to avoid real estate acquisition and registration taxes,” said an investment banker.
The Paraspara Seoul complex, nestled in the scenic foothills of Bukhansan, comprises 200 for-sale units and 130 standard hotel rooms. It is operated under a management contract by Shinsegae Chosun Hotel.
HANWHA’S DEBT-TO-EQUITY RATIO
The acquisition of Paraspara is expected to further increase Hanwha Hotels’ gearing ratio.
Its debt-to-equity ratio rose to 197.4% as of the end of March from 175.2% at the end of 2023 after it purchased a 58.62% stake in Ourhome Ltd, a catering service provider, for 869.5 billion won purchase earlier this year.
Once Hanwha acquires Paraspara, the hotel will raise 30 billion won through a rights offering to cover its capital shortfall that stood at 17.2 billion won as of the end of 2024.
A Hanwha Hotels & Resorts official told The Korea Economic Daily that the company had weighed an acquisition of Paraspara, but no decision has been made.
By Hyun-jin Ra
raraland@hankyung.com
Yeonhee Kim edited this article.
