Meritz Sec buys Brussels building for $1.6 bn; plans REIT IPO
By Dec 27, 2019 (Gmt+09:00)
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Meritz Securities Co. Ltd. has acquired Brussels’ largest building for 1.4 billion euros ($1.6 billion) in the single biggest property deal in Belgium by value.
For the Finance Tower acquisition, the South Korean brokerage firm is planning to raise about $300 million from a REIT initial public offering at home and an additional $300 million through sell-down to domestic pension funds, according to investment banking sources on Dec. 27.
It will borrow a senior debt for the remaining $1 billion in Europe.
The transaction represents one of the largest cross-border property deals secured by Korean investors, matching the National Pension Service’s 1.2 billion-pound ($1.6 billion) purchase of Goldman Sachs’ new European headquarters in London in 2018.
To buy the skyscraper from Breevast BV, a Dutch real estate investment firm, Meritz had formed a consortium with two domestic asset managers – JR AMC Co. Ltd. and AIP Asset Management Co. Ltd.
JR AMC acquired the Finance Tower via a REIT and then sold the entire interest in the REIT to Meritz Securities and its affiliates through a vehicle of AIP Asset Management.
Market observers saw the acquisition cost as too high for Meritz Securities, given the company’s equity capital of 3.7 trillion won ($3.2 billion) and the Brussels’ commercial real estate market size.
To reduce the risk of an exit failure, Meritz will continue to own the 36-story property by listing a parent REIT on the Korea Stock Exchange of the REIT used to buy the building.
The parent REIT is likely to raise between 300 billion won and 400 billion won ($258 million-$344 million) in the first half of next year. Its expected annual yield of 8% is above the average 5-7% of REITs listed in Korea.
For the sell-down portion of 300 billion to 400 billion won, Meriz' affiliates, including Meritz Fire & Marine Insurance Co. Ltd., may continue to hold their interests, if the resale falters.
The second-tallest building in Belgium has a floor space of 220,000 square meters and houses the Federal Public Finance Service under a 15-year lease contract. It was built in 1983 and renovated throughout in 2008.
An obstacle to the planned IPO could be a possible delay in regulatory changes aimed at exempting the unlisted subsidiary REIT from the rules applying to its listed parent REIT, the sources said.
Write to Hyun-il Lee and Jinsung Kim at hiuneal@hankyung.com">
hiuneal@hankyung.com
Yeonhee Kim edited this article
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