Korean insurers invest $102 mn in senior debts of Manhattan building

Three South Korean insurance firms have invested 115 billion won ($102 million) in senior secured debts of a building in Manhattan, New York which is entirely occupied by a public high school, for an expected annual return of between 4 and 5%.

KTB Asset Management Co. Ltd. arranged the investment from unidentified Korean insurers through a project fund for a 10-year investment period.

The high school under the NYC Department of Education will continue to use the building, Trinity Place, as a campus through 2027, KTB Asset Management said in a statement on April 5.

The South Korean institutions won exclusive negotiation rights from the building’s landlord for the investment in secured debts which were issued to refinance debts owed to UBS, although the global investment bank offered to roll them over, according to KTB Asset. The loan-to-value ratio for the senior debts is less than 63%.

The property is surrounded by headquarters of Goldman Sachs and Deutsche Bank and the Federal Reserve Bank building of New York.

South Korean investors have been scaling up investments in senior and mezzanine debts secured by commercial buildings in the heart of New York City, while shying away from equity interests in US real estate, the prices of which rose sharply.

Since last November KTB Asset has provided debt financing of 191 billion won on aggregate to a Marriott Hotel in Brooklyn, New York and 850 Third Avenue in New York City, together with other domestic institutions.  

The asset manager added that it was planning a similar type of new investments with the institutional investors participating in the project fund, without elaborating further.