Goldman Sachs’ real estate debt fund raises $650 mn in loan from Korea

Goldman Sachs’ latest real estate credit investment vehicle has raised $650 million in senior loans from a pool of South Korean institutional investors, out of $2.5 billion syndicated loans it is seeking to originate for the fund.

The fund financing comes after Goldman Sachs in January announced the final close for Broad Street Real Estate Credit Partners (RECP) III with $6.7 billion in commitments.

The US investment bank itself injected $1.7 billion of its own capital into the fund which also attracted the Construction Workers Mutual Aid Association and other South Korean institutional investors as limited partners last year, according to sources with knowledge of the matter on May 10.

In syndicated loans, RECP III has raised a total of $1.9 billion from South Korean investors, mainly insurance companies, and two European insurers year to date.

Shinhan Alternative Investment Management Co. Ltd. sourced the loan investment and launched a domestic fund to collect $650 million for an expected annual return of 5.3%.

Seventy percent of the loan is denominated in the US dollar, with the rest in euro.

It was first reported by the Maeil Business Newspaper on May 10 and confirmed by the sources.

Hana Financial Investment Co. Ltd. underwrote the portion of South Korean investors and resold part of them. The securities company put its own capital of $175 million into the domestic fund and is expected to sell it down to other domestic institutional investors, too.

The domestic fund vehicle received an AA credit rating from a South Korean ratings agency, which means a cut in the risk coefficient applying to insurers’ real estate debt investments to 3% from 6%.

RECP III targets over 7-8% annual returns by pursuing various types of real estate assets, including multifamily properties, rather than prime office buildings which offer low returns for low risk. Leverage created by the syndicated loans is expected to boost the IRR of RECP III further.

It focuses on direct originations of both senior and mezzanine loans secured by high-quality assets in major markets, providing highly customized loans from $100 million to in excess of $500 million throughout the US and Europe, according to Goldman Sachs.

Hyungjoo Jin, head of Hana Financial’s alternative investment department led the loan investment, after arranging an equity investment in Britain’s High Speed 1 (HS1) last year.

By Daehun Kim

daepun@hankyung.com

Photo: Getty Images Bank