Real estate development experts are dissuading bidders in a tight race to buy the property of state-run Korea Power Electric Corp. in Samseong-dong, an affluent district in southern Seoul.

KEPCO put its 79,342-square-meter plot of land and headquarters building up for sale last Friday. The competition for the property is escalating, with the nation’s top two conglomerates ― Samsung and Hyundai ― both expressing interest in bidding.

“From an investor point of view, the deal is not an attractive one as a positive return on the investments seems unlikely (in the short term future),’’ a local real estate development consultancy wrote in a report that was quoted by Yonhap.

“A bidder seeking (to win) the deal for investment purposes could face the ‘winner’s curse’ phenomenon,’’ meaning that the winner of the bid would likely suffer low gains later, according to the report. 

The consultancy based its conclusion on the evaluation of the property development cost, estimated to be at least 10 trillion won ($9.8 billion).

The cost projection covers the minimum cost of the property (3.3 trillion won), the price of land to be donated to the city government (1.3 trillion won), construction costs (3 trillion won), and tax payments and other expenses (2 trillion won).

Industry watchers forecast the development cost could exceed 10 trillion won, as the bidding price could soar due to the strong cash liquidity of the two candidates.

“The future value of the property after development, however, could sink below the minimum property development cost as Seoul City wants to develop the KEPCO site as a convention industry-friendly district, rather than a commercial building complex,’’ the report said.

This is one of the reasons why the support of shareholders will be a key factor for following through with the bid.

“A bidder who would enjoy owning the property rather than seek gains from investments is likely to have an upper hand in proposing a high bidding price,’’ an analyst of Kyobo Securities said.

At this point, Hyundai Motor has a clearer property development plan than Samsung.

While Samsung has kept low-key about its bid, Hyundai Motor Group presented a plan to develop the KEPCO site into a business and convention district, making it the location of its headquarters and building a landmark auto theme park like Volkswagen’s Autostadt in Wolfsburg, Germany.

The financial sector predicts both Samsung and Hyundai will consider a consortium to raise funds for the bid, while hedging risk.

Meanwhile, an industry source said Samsung Electronics would pair with Samsung Life to seek the KEPCO site, while Hyundai Motor would ask Kia Motors and Hyundai Mobis to join the bid.

The final bidder will be announced at the end of this month as bids will be accepted by Sept. 17.

By Seo Jee-yeon (jyseo@heraldcorp.com)