South Korean institutional investors are offering rescue financing for overseas office buildings, which their local peers hav not yet exit, as they are selectively resuming global real estate investments.
Amid signs of a recovery in the global office market, Korean limited partners expect the improved market liquidity will help them divest with little difficulty in case their investment goes awry.
Korea Scientists & Engineers Mutual-aid Association (SEMA) recently poured 40 billion won ($29 million) into Crystal Park in northwest Paris for its refinancing, according to investment banking sources on Tuesday. It is owned by South Korea’s Master Premier REIT.
SEMA executed the investment after its anchor tenant PricewaterhouseCoopers (PwC) extended its rent by 12 years early this year.
Investing in overseas offices, to which other Korean funds are exposed, can reduce the information gap, compared with foreign-owned properties, said alternative investment managers.
Meritz Alternative Investment Management Co., specializing in overseas real estate investments, launched a 300 billion won ($215 million) global special situation fund in September.
The fund will invest in equities and debts in overseas real estate, targeting an internal rate of return of 10% per annum. It raised the fund only from its sister companies: Meritz Fire & Marine Insurance Co., Meritz Securities Co. and Meritz Capital Co.
It is the first fund that received commitments only from Mertiz Financial Group’s units. It is working on executing its first investment as early as December this year.
RISKY BETS
Korean alternative investors are also increasing their bets on equities and mezzanine tranches in search of higher yields on the back of falling senior loan rates.
During the period of the real estate market downturn in the aftermath of COVID-19, Korean limited partners made additional commitments to overseas offices for refinancing. Some of them took over their senior loans to avoid loan defaults on the buildings.
No 1 Poultry, a City of London office, is one of such cases. After Daishin Securities Co. failed to recoup its equity investment in the landmark building, its affiliate Dashin F&I Co. came to its rescue. It took over its senior loans and secured the rights to sell the property.
In Europe, real estate transactions were up 15% to 37.1 billion euros ($39 billion) in value in the third quarter of this year from the year prior, according to Savills.
Savills forecast real estate transactions in Europe to increase 15% to about 170 billion euros for all of 2024.
By Byung-Hwa Ryu
hwahwa@hankyung.com
Yeonhee Kim edited this article.
