South Korea’s Construction Workers Mutual Aid Association (CWMA) will acquire 57 billion won ($51 million) worth of equity stakes in two domestic funds that snapped up overseas commercial buildings this year, according to a local media report, reflecting a growing trend among local financial services firms seeking to sell down their stakes in real estate funds.
Small-sized brokerage and insurance companies in South Korea have been joining forces to hunt for landmark or prime office buildings worth hundreds of million dollars in the United States and Europe. After a deal closing, part of which is financed through loans, they are willing to offer their equity stakes in the fund set up for the property acquisition to domestic pension and savings funds which are looking for high-yielding alternative investments.
The CWMA, a $2.7 billion savings fund, has recently decided to invest 35 billion won in a fund that had purchased Safeco Plaza, a 50-story skyscraper in downtown Seattle, for $387 million this year, the Maeil Business Newspaper said on Oct. 11.
In addition, the association will put 22 billion won into another fund that had bought an Amazon logistics center outside Poznan in western Poland for $85 million earlier this year.
The two funds are expected to deliver annual returns of 7% and 9%, respectively, the daily added, citing investment banking sources.
To the fund that acquired Safeco Plaza, which Safeco Insurance Co. uses as its head office, a number of South Korean institutional investors, including brokerage and insurance companies, committed capital. South Korea-based Vestas Investment Management Co. runs the fund.
The other real estate fund that bought Amazon’s logistics center in Poland is being managed by Hana Asset Management Co. Ltd. Two domestic brokerage houses – NH Investment Securities Co. Ltd. and Hana Financial Investment Co. Ltd. – evenly split the 45 billion won equity stake in the fund, excluding loans, according to CNews, an online news outlet for the construction industry.
Last month Korea Investment & Securities had agreed to buy an office building of Swiss pharmaceutical company Novartis under construction in Paris for 500 billion won, with an aim to sell down its stake in the property.
<Edited by Yeonhee Kim>