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Shinhan Alternative invests $300 mn in debt on Brooklyn office complex

Sep 13, 2018 (Gmt+09:00)

Shinhan Alternative Investment Management Inc. has invested $300 million in mezzanine debts against Dumbo Heights, an office campus in Brooklyn, on behalf of 10 South Korean institutional investors.

The mezzanine notes are part of the $480 million refinancing package secured by the property's co-owners, including Kushner Companies of Donald Trump’s son-in-law Jared Kushner, according to investment banking sources on Sept. 11.

Shinhan Alternative of South Korea’s No. 2 banking group Shinhan Financial underwrote the entire mezzanine tranche and B-note, a secured debt, against the office complex after pooling money from insurance companies and other institutional investors.

A-note, which has seniority in claim over B-note, was underwritten by an unidentified US bank.

“After rounds of refinancing on US properties were wrapped up last year, investment opportunities are dwindling. But domestic demand for US assets remains strong amid heightened uncertainty over the global economy,” one of the sources told the Korean Investors.

Annual interest rates for the B-note and the mezzanine debt are 5% and 7%, respectively with a five-year term.

The refinancing was aimed to exit part of investments made by Kushner Companies and co-owners including RFR Realty and LIVWRK Holdings.

In 2013, they jointly bought five properties with a gross floor space of about 70,000 square meters in Brooklyn, New York, for $375 million.

They transformed them into an office and retail complex in a reportedly $100 million project and rebranded them as Dumbo Heights.

Its reassessed value for the refinancing is $640 million.

Of the $300 million investment in the debts, $250 million was hedged against currency fluctuations.

“Because the won/dollar hedging costs reached 1.5% per year, institutional investors with extra dollars tend to invest their dollars directly,” said another investment banking source.

Dumbo Heights is located between Manhattan and Brooklyn bridges and its vacancy rate is just 5%.

Its tenants include WeWork, a shared office provider, online shopping site Etsy and 2U, an education platform. They have average 10 years of remaining lease term.

Earlier this year, Shinhan Alternative invested $100 million in a mezzanine debt on US hotels for three South Korean insurers, participating in Atrium Holding Co.’s $750 million debt refinancing on a portfolio of 29 hotels.

It had arranged a $190 million debt investment in One Worldwide Plaza, a landmark office building in New York, late last year.

Including the Dumbo Heights debt investment, Shinhan Alternative manages more than 2.4 trillion won ($2.1 billion) of assets.

By Daehun Kim

Photo: Getty Images Bank

Yeonhee Kim edited this article

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