Korean insurers invest $160 mn in debt of Facebook-leased NY property

A group of South Korean insurance firms have invested 180 billion won ($160 million) in mezzanine debt secured on two interconnected buildings in New York, which house Facebook Inc. and other internet and technology companies.

The mezzanine tranche is part of $430 million in loans originated by Orda Management Corporation, a US property management firm, to repay debt to New York State Teachers’ Retirement System, and cover renovation and other costs for the early 20th century office buildings in Midtown South.

Orda Management has owned the two buildings at 225-233 Park Avenue South since 1954. They are combined through a shared stairwell and has a lease space of 60,000 square meters after a recent substantial renovation.

The Korean insurers invested via a fund of South Korea’s Hangang Asset Management Co. Ltd. for an expected annual return of the 5% range for a 10-year investment period, according to real estate investment banking sources on August 27.

The mezzanine debt investment followed a report from the Commercial Observer on August 11 that Barclays Bank provided a $235 million senior loan and $195 million mezzanine loan on the property in early June.

The sources declined to give further details with regard to the report.

In close proximity to Union Square, the buildings are fully leased and also house BuzzFeed, an US internet media company and STV, an engineering consultant.

With office building prices in New York and other gateway cities in the US soaring over the past couple of years, South Korea’s biggest asset owners are switching into mezzanine or subordinated debt, as well as office buildings in Australia.

Earlier this year, Hangang Asset arranged a 100 billion won investment by South Korean investors in mezzanine debt against an Amazon-occupied building in Seattle.

By Daehun Kim

daepun@hankyung.com