Korean funds offer rescue financing for global offices

South Korean institutional investors are offering rescue financing for overseas office buildings, which their local peers have yet to exit, as they are selectively resuming global real estate investments.

Amid signs of a recovery in the global office market, Korean limited partners expect improved market liquidity to help them divest of these with little difficulty in case their investment goes awry.
 
Korea Scientists & Engineers Mutual-aid Association (SEMA) recently poured 40 billion won ($29 million) into Crystal Park in northwest Paris for its debt refinancing, according to investment banking sources on Tuesday. South Korea’s Master Premier REIT owns it.

SEMA executed the investment after its anchor tenant PricewaterhouseCoopers (PwC) extended its rental contract by 12 years early this year.

Investing in overseas offices to which other Korean funds are exposed can reduce the information gap compared with foreign-owned properties, said alternative investment managers.   

Meritz Alternative Investment Management Co., specializing in overseas real estate investments, launched a 300 billion won ($215 million) global special situation fund in September.

The fund will invest in equities and debts in overseas real estate, targeting an internal rate of return of 10% per annum. Fundraising came only from its sister companies: Meritz Fire & Marine Insurance Co., Meritz Securities Co. and Meritz Capital Co.

It is the first fund to receive commitments only from Mertiz Financial Group’s units. It is working on executing its first investment as early as December this year.

RISKY BETS

Korean alternative investors are increasing their bets on equities and mezzanine tranches in search of higher yields on the back of falling senior loan rates.

During the real estate market downturn in the aftermath of COVID-19, Korean limited partners made additional commitments to overseas offices for refinancing. Some took over their senior loans to avoid loan defaults on the buildings.

No 1 Poultry, a City of London office, is one of such cases. After Daishin Securities Co. failed to recoup its equity investment in the landmark building, its affiliate Daishin F&I Co. came to its rescue. It took over its senior loans and secured the rights to sell the property.

In Europe, real estate transactions were up 15% to 37.1 billion euros ($39 billion) in value in the third quarter of this year from the year prior, according to Savills.

Savills forecasts real estate transactions in Europe to increase 15% to about 170 billion euros for all of 2024.

Write to Byung-Hwa Ryu at hwahwa@hankyung.com
 


Yeonhee Kim edited this article.