Brookfield completes $1.9 bn debt refinancing on IFC Seoul

Brookfield Asset Management Inc. has borrowed an additional 475 billion won ($402 million) on International Finance Center in Seoul (IFC Seoul) in a 2.28 trillion won ($1.93 billion) refinancing deal, taking advantage of lowered interest rates and the enhanced property value, but the new borrowing rates were not as low as expected.

The fresh five-year loans are more than half the 750 billion won Brookfield had invested to acquire the complex for 2.55 trillion won in 2016 from AIG. The loan proceeds are expected to return to its limited partners.

For the acquisition which marked the biggest property transaction in South Korea, the Canadian investment firm had borrowed 1.8 trillion won in five-year loans from South Korean financial institutions and pension funds, with a loan-to-value ratio of 70%.

The original loan portfolio consisted of 1.6 trillion won senior loans and 205 billion won mezzanine funding.

In the refinancing package, the amount of senior loans increased to 1.94 trillion won from 1.6 trillion won, with the rates brought down by 0.3-0.5% points to 3% per annum, according to investment banking sources on Oct. 17.

The borrowing rates had been expected to fall to the 2% range, given that the refinancing process began around the time when the Bank of Korea in July made its first rate cut in three years, bringing the base rate to 1.50%.

The lenders include the financial arms of KB Financial Group, Samsung Group and the National Agricultural Cooperative Federation (or NongHyup).

Mezzanine loans on IFC Seoul rose to 340 billion won from 205 billion won at a rate of close to 5%, down slightly from mid-5%.

Korean pension and retirement savings funds and non-banking financial services companies provided the mezzanine financing.

IFC Seoul comprises IFC Mall, Conrad Seoul Hotel and three office buildings, with a floor area of 507,273 square meters.

In total, both the senior and mezzanine loans represent nearly 70% of the property’s revised value of 3.37 trillion won, based on the recent revaluation.

Increased occupancy in the office buildings and improved shopping mall business helped lift the valuation.

The refinancing was completed before the Bank of Korea on Oct. 16 made its second 25-basis-point rate cut since its first move in July.

The loans can be repaid prior to maturity from the third year.

Write to Hyun-il Lee at hiuneal@hankyung.com