Shinhan GIB underwrites $190 mn mezzanine debt on Manhattan building

Shinhan Financial Group’s newly-launched investment banking division has underwritten $190 million of 10-year mezzanine debt on One Worldwide Plaza, a landmark office building in Midtown Manhattan, in its first global alternative investment since the group combined IB operations of its four units in July.

Shinhan Group & Global Investment Banking (GIB) participated in the underwriting consortium for $1.17 billion refinancing raised by New York REIT which sold a combined 48.7 percent stake in the tower to RXR Realty and SL Green Realty in September.

The refinancing was managed by Goldman Sachs and Deutsche Bank, and Shinhan GIB completed the payment on Dec. 22.

The mezzanine tranche has a higher seniority than other mezzanine notes, offering an annual yield between 4.5% and 5.0%, according to investment banking sources on Dec. 26.

The parent group of South Korea’s second-largest lender brought together IB operations of its banking, brokerage, life insurance and short-term loan providing companies under the GIB division to boost alternative investment.

The combined division helps them cooperate to tailor their approach to specific deals and set detailed financing plans.

“Shinhan Financial Group’s companies had been just a participant in global alternative investments. This transaction is meaningful in that we served as an arranger, making use of the synergies created from the combination of IB operations,” said Dong-hwan Lee, head of Shinhan GIB.

It will sell down the mezzanine debt to four to five domestic insurers, including Shinhan Life Insurance Co. Ltd.

One Worldwide Plaza, valued at $1.74 billion, is a 49-story building with a rentable space of 192,628 square meters. It was built in 1987 and underwent a full renovation in 1996.

Its long-term tenants include Nomura Holdings and Cravath, Swaine & Moore LLP, a US law firm.

Shinhan Life sourced the deal. The group’s real estate alternative investment arm, formerly Shinhan Private Equity Inc. and launched in November, is responsible for the resale through a fund of fund.

Under the GIB business model, the GIB division sources an investment deal and brokerage Shinhan Investment Corp. takes charge of underwriting and arrangement. Then Shinhan Bank, Shinhan Life and Shinhan Capital Co. Ltd. invest in the deal which may include other institutional investors from outside the group.

Two other South Korean financial holdings firms - Hana Financial Group and NongHyup Financial Group – have adopted a similar business model, called corporate investment banking, to increase alternative investment.

Shinhan GIB plans to set up overseas offices in Vietnam and Indonesia, in addition to New York and Shanghai. It is taking a close look at real estate development projecting financing and infrastructure investments in Vietnam and Indonesia, respectively, Lee added.

By Daehun Kim, Chang Jae Yoo and JiHoon Lee

daepun@hankyung.com