As the National Pension Service began the process of replacing the general partner (GP) for "Yeoksam Centerfield," a core office asset in Seoul's Gangnam area, it was confirmed that the internal compliance unit expressed opposition to transferring the asset. The compliance unit reportedly judged that damage to the trust relationship between the limited partner and the manager alone makes it difficult to establish grounds for asset transfer or manager replacement.
According to the investment banking (IB) industry on the 23rd, the Legal Support Team under the National Pension Service's Compliance Support Office recently expressed opposition to the Investment Committee's agenda to replace the manager of Yeoksam Centerfield. As a result, the Investment Committee reportedly did not vote on the agenda to transfer the Yeoksam Centerfield asset and ended the meeting by reporting a procedural direction that the manager should be replaced. The Investment Committee is an internal body with voting authority over the National Pension Service's individual investments.
The Legal Support Team is said to have offered the view that damage to the trust relationship between the limited partner and the manager alone cannot constitute grounds for transfer, and that IGIS Asset Management's decision to pursue a sale was a normal procedure ahead of the fund's maturity in Oct. this year. The Legal Support Team is responsible for reviewing domestic and overseas pre-contract compliance and domestic proxy voting plans.
This runs counter to the earlier view that the National Pension Service effectively decided to replace the manager by convening the Investment Committee on the 20th. Previously, the prevailing interpretation in the market was that as IGIS Asset Management pushed ahead with the sale of Centerfield despite opposition from the National Pension Service and Shinsegae Property, the National Pension Service began the process to replace the manager.
However, with the internal compliance unit applying the brakes due to legal risk, the manager replacement effort appears likely to face headwinds. Under the Financial Investment Services and Capital Markets Act, replacing a GP requires a significant reason such as a clear violation of law or contract, and the compliance unit believes that mere differences over management direction between investors and the manager are unlikely to be recognized as grounds for replacement.
The Yeoksam Centerfield fund reaches maturity in Oct. this year. IGIS Asset Management says, "Uncertainty persisted due to differences among beneficiaries over extending the maturity, and with maturity approaching, we initiated the sale process to enable redemption and protect investors." On the 14th, IGIS Asset Management sent a request for proposal (RFP) to a foreign real estate advisory firm for the asset sale.
The Yeoksam Centerfield fund is owned 49.7% each by the National Pension Service and Shinsegae Property. IGIS Asset Management's equity is only 0.6%. The National Pension Service argues that, considering annual dividends of around 30 billion won and the continued appreciation of the Gangnam Business District (GBD), an early sale is inappropriate, while IGIS Asset Management maintains that a sale is unavoidable due to failure to agree on extending the maturity.
An industry official said, "The internal compliance unit's opposition is not mere advice but an internal control mechanism warning of legal risk."