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Alternative investments

Hana Alternative logs over 9% return on US residential project

The mezzanine loan for a Boston residential complex, completed in 2020, was repaid prior to maturity

By Jul 15, 2021 (Gmt+09:00)

(Courtesy of EchelonSeaport)
(Courtesy of EchelonSeaport)

South Korea's Hana Alternative Asset Management Co. is estimated to have achieved an annualized return of 9.83% from the $51.5 million mezzanine loan it provided for a luxury residential development in Boston.

For the $950 million construction in Boston's Seaport District, Hana had arranged the loan investment in April 2019, as part of a $300 million mezzanine tranche originated by Cottonwood Group, a US real estate developer. 

After the construction of the three-tower complex was completed early last year, the mezzanine loan was repaid in April this year, according to sources with direct knowledge of the matter on July 14. 
 
"Even in the pandemic situation, the construction proceeded without delay," a Hana Alternative official told Market Insight. "Thanks to the popularity of its residential units, the mezzanine loan was paid off six months earlier than its maturity date."

A Cottonwood source said the early redemption was one of the advantages the company provided to investors in its development projects.

"As in the case of this development project, we are preparing tailor-made founders' funds for various investors," he added.

Hana Alternative was able to further bolster its return by saving brokerage fees because it directly sourced the investment without hiring a third-party broker. At the time, the financing deal marked the first loan investment in a US property development sourced by a South Korean institution.

EchelonSeaport complex (Courtesy of EchelonSeaport)
EchelonSeaport complex (Courtesy of EchelonSeaport)

EchelonSeaport consists of two condominium towers and one multifamily tower, including 717 luxury residential units. They sell a studio at $700,000 and a three-bedroom condo unit, measuring 224 square meters, at $5 million.

When Hana invested in the then largest residential development in Boston, both Hana and Cottonwood said in a joint statement that the transaction marked the beginning of their strategic partnership.

Under the partnership, Hana was allowed to tap into Cottonwood's investment platform, with focus on real estate investment opportunities in primary markets such as Boston, New York, Los Angeles, San Francisco, and Seattle. 

Over the past few years, South Korean institutional investors have ramped up mezzanine loan invetments for US real estate projects ranging from office buildings, hotels and condominiums.

But some of their investments, including a New York condominium and a Las Vegas hotel, have turned sour after their developers failed to pay interest, or defaulted on the loans.

Write to A-young Yoon at youngmoney@hankyung.com

Yeonhee Kim edited this article.

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