Hyundai Asset seeks retail funding for $76 mn Scotland property deal

Hyundai Asset Management Co. Ltd. has rolled out its first public real estate fund to close the 58.2-million-pound ($76 million) acquisition of a Scotland building, joining the growing ranks of South Korean asset managers which funded recent global property investments with money from individual investors.

It plans to raise up to 40 billion won ($36 million) in a public fund between Feb. 25 and March 7 to buy a three-story, 13,884-square-meter office leased to the National Health Service of the Scottish Government, the company said in a regulatory filing last week.

London-based Greenridge Investment Management is selling the property to the South Korean firm, less than three years after acquiring it from Highland Properties, a developer.

Hyundai Asset will borrow 35.9 million pounds, or 65% of the acquisition price, in a three-year secured loan from UK lenders at an annual interest rate of 3.15%, according to the filing.

The acquisition price includes 4.2 billion won of financial expenses and fees, on top of 55.2 million pounds it will pay to Greenridge.

It will close the acquisition in mid-March.

The building at Gyle Square, 1 South Gyle Crescent, Edinburgh is in the South Gyle business district on the western edge of Edinburgh. It is the fourth largest office market in Scotland, where multinational companies such as JPMorgan, Tesco Bank and Royal Bank of Scotland are located.

NHS Health Scotland has fully occupied the property since it was constructed in 2003 under a lease until June 14, 2029.

The single tenant pays 3 million pounds in rents per year and takes full responsibility for taxes, insurance and maintenance expenses.

The retail fund launched by Hyundai Asset has a term of three and a half years and will be listed on the Korea Stock Exchange within 90 days of the launch.

With South Korean investment firms stepping up global real estate investments, they are increasingly tapping retail investors to fund the deals, supported by loosened regulations on real estate investment trusts.

They offer around 5% yields per year with investment terms of three to five years, attracting individual investors in search of stable yields.

Korea Investment & Securities Co. Ltd. recently launched a public property fund to raise 55 billion won to fund its 124-billion-won purchase of Pirelli’s R&D center building in Milan, Italy.

The combined net asset value of public property funds for both domestic and domestic investment is 2.5 trillion won as of Feb. 20, according to the Korea Financial Investment Association, up 19% from a year-earlier period. Cross-border property funds account for 70%.

In October 2018, IGIS Asset Management Co. Ltd. rolled out South Korea’s biggest public property fund to raise 375 billion won to buy Trianon Tower, a landmark building in Frankfurt, for about $760 million in a consortium with Hana Financial Investment.