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Korean investors buy $75 mn debt of Warburg Pincus-backed Hanoi hotel

Oct 20, 2017 (Gmt+09:00)

2 Min read

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A pool of South Korean pension and retirement funds have invested around 85 billion won ($75 million) in debt of a Warburg Pincus-backed, five-star hotel in Hanoi, while a Korean asset manager is in last-stage talks to buy an office building in Ho Chi Minh City for around 70 billion won ($62 million).


The debt was secured on Warburg Pincus’ equity stake in Sofitel Legend Metropole Hanoi, after the US private equity firm acquired a 50% of stake in the hotel from a fund of asset management firm VinaCapital for $100 million earlier this year.


The Hanoi government’s ownership of the other half of the hotel helped draw interest in the five-year debt, because the state is implementing policies supporting tourism growth, according to financial industry sources on Oct. 19.


Hana Asset Management Co. Ltd. launched a domestic vehicle for the investment, offering an interest rate of 7% to 8% per annum.


Separately, South Korean asset manager KORAMCO is at the last stage of negotiations to acquire a 25-story office building, TNR Tower Nguyễn Công Trứ, in central Ho Chi Minh City. The property with 20,000 square meters of floor space is owned by Vietnam’s Maritime Bank.


To fund the deal estimated at 70 billion won, KORAMCO is raising a domestic fund in which Hanwha Life Insurance Co. Ltd. is an anchor investor.


South Korean investors had refrained from investing in Vietnam’s real estate because of high borrowing costs, legal uncertainties and complex ownership structures with the government control in the Southeast Asian country.


A South Korean fund launched in 2008 to invest in Vietnam’s real estate market has not yet been liquidated even after the expiration in 2014, weighing further on investor sentiment.


But robust demand for commercial real estate in Vietnam on the back of rapid economic growth and cheap prices compared with China and Hong Kong are attracting global real estate investors.


“The acquisition, if closed, will be meaningful in that there is no precedent for a South Korean investor buying a whole ownership of a building in Vietnam,” said a real estate investment source.


Sofitel Legend Metropole Hanoi, built in 1901, is run by France-based global hotel chain AccorHotels Group. Located in the old city of Hanoi, it has good access to prime tourist destinations.


Warburg Pincus has been stepping up investment in Vietnam’s real estate since 2013.


In 2015, Korean Teachers’ Credit Union lent 110 billion won in loans to Warburg Pincus in 2015 to fund the construction of shopping malls in Vietnam. The investment produced an 8%-range return per annum.


By Daehun Kim


daepun@hankyung.com


Yeonhee Kim edited this article

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