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Debt financing

Meritz Sec raises risk appetite with $350 mn loan on NY condo tower

Feb 26, 2020 (Gmt+09:00)

Meritz Securities Co. Ltd. has entered New York City’s inventory loan market by providing $350 million financing on a luxury condominium tower in Manhattan, most of which remains unsold.

The investment appeared to show the Korean company’s willingness to take more risk for overseas investment. It has been keen to find new income sources after the South Korean government cracked down in late 2019 on a surge in domestic real estate project financing which accounted for 60% of its earnings.

Meritz underwrote the whole $350 million loan collateralized by The Centrale, a 63-story residential tower in Midtown East of Manhattan, according to company sources involved in the transaction on Feb. 25.

Ceruzzi Properties, a US real estate developer, secured the inventory loan, or short-term financing, to pay a previous construction loan collateralized by the skyscraper in 2017.

The new financing marked the first Korean inventory loan in New York City. Details about the financing terms and expected yield were not disclosed.

The residential tower, built in early 2019, comprises 124 condo residences and retail space on the lower level.

Ceruzzi Properties began selling the condos last April, but about 100 condo units remain unsold.

Meritz is expecting that all the condo units will be sold within the next couple of years, given that two-thirds of the 124 residences are smaller than 132 square meters with one or two bedrooms.

But industry sources in Korea showed a mixed response. Some pointed out that even one-bedroom home in New York is as much as $2.7 million on average, while others said the sales prices are reasonable compared with other nearby apartments.

Last December, Meritz made its foray into India’s residential real estate market. It had invested $425 million in a housing finance platform in India launched by Mumbai-based financial services firm Edelweiss Group as an anchor investor. It was seen as taking both foreign exchange and business risks for high yield.

Meritz also had acquired Brussels’ largest building for 1.4 billion euros last December, which represented the single biggest property deal in Belgium.

By Hyun-il Lee

Yeonhee Kim edited this article

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