Brookfield may raise $90 mn from Korea for property mezzanine fund

Sep 12, 2016 (Gmt+09:00)

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A real estate mezzanine fund of Brookfield Asset Management, for which the private investment firm is aiming to raise $2 billion globally, is expected to attract about 100 billion won ($90 million) from South Korean investors, as property investment funds of major global managers have been stoking interest of domestic institutions.

KB Insurance Co. Ltd., a sister company of top South Korean lender Kookmin Bank, will commit 30 billion won to Brookfield Real Estate Finance Fund Ⅴ, upon approval of its internal committee, according to investment banking sources on September 9. Other South Korean insurers, including Lotte Insurance Co. Ltd. of retail giant Lotte Group, and retirement savings funds are also considering participating in the blind-pool fund. Meritz Asset Management, which is marketing the mezzanine fund as a fund of funds in South Korea, is aiming to raise about 100 billion won from the sale of the fund in the country.

Brookfield Real Estate Finance Fund Ⅴ will consist of mezzanine or subordinated loans secured by real estate assets. It is targeting an annual return of about 10~12% for the duration of 12 years, which may translate into net gains of 7~8% a year after fees. Upon completion of the fund-raising, it will be put mainly into prime commercial properties located in major cities in the United States, although Brookfield has yet to specify investment targets for the fund.

“The fund is drawing a keen interest not only because it is managed by Brookfield, a qualified real estate investor, but also as demand is growing for overseas alternative investments from domestic institutional investors,” one of the IB sources told the Korea Economic Daily. He added that the fund is expected to raise 100 billion won from South Korea as planned without difficulty.

The fund-raising came after Brookfield reportedly had raised a total of $700 million from major South Korean institutional investors for its $14 billion infrastructure fund. Brookfield manages around $240 billion and specializes in real estate, renewable energy and infrastructure investments.

By ZiHoon Lee and Chang Jae Yoo

lizi@hankyung.com