Trianon building (center) in the Frankfurt financial district in Germany (Courtesy of Getty Images)
A 370-billion-won ($270 million) real estate fund managed by IGIS Asset Management Co. faces a heavy loss from its investment in Trianon, an office building in Frankfurt, after it defaulted on loans linked to the skyscraper, the Korean asset management firm said on Tuesday.
The special purpose vehicle (SPC) used to buy the property for 880 billion won in 2018 is expected to file for bankruptcy within the next three years, according to the company.
The vehicle confirmed the event of default on the loan, after it failed to agree a loan restructuring plan with lenders by the May 31 deadline. Accordingly, the creditors declined to extend a standstill period, during which they did not demand a loan repayment.
The so-called Trianon fund was formed in 2018 with the contributions from institutional and individual investors.
Last year, it saw about an 80% loss after Deka Bank, which represented 60% of the building’s tenants, did not extend its lease in 2020 amid the office market downturn.
Its moving out led to a sharp depreciation in the 45-story building and a surge in its loan to value ratio (LTV) to over 65%.
The exact size of losses will be confirmed after its asset disposal.
Trianon building in Frankfurt (Courtesy of Getty Images)
As the loan ratio skyrocketed, the SPC fell into a cash trap at the end of 2021, in which the lease income was first used to pay an interest, with the remainder set aside to provide additional security to the lenders.
At the end of December last year, its LTV shot up to nearly 70%.
In July last year, IGIS Asset decided to sell the high-rise building and extended the fund’s expiration by two years at a meeting with limited partners in October.
But it has not yet found a new buyer of the property.
By Byung-Hwa Ryu
hwahwa@hankyung.com
Yeonhee Kim edited this article
