KTB Asset Management Co. Ltd. has been picked as the preferred buyer of the NASA headquarters building in Washington D.C. on behalf of small-sized South Korean securities firms in a deal estimated at 400 billion won ($351 million), underscoring the growing interest of domestic investors in U.S. property assets despite their recent price increase.
South Korea brokerage companies, including KTB Investment & Securities Co. Ltd., Meritz Securities Co. Ltd. and Kiwoom Securities Co. Ltd., will put a combined 180 billion won into the transaction to participate as equity investors, according to investment banking sources on Oct. 26. Meritz Securities is known to pay the half of the equity purchase price. The balance of 220 billion won will be borrowed from local financial institutions.
If the acquisition goes through after due diligence on the property, the Korean asset manager is most likely to lease back the building to the National Aeronautics and Space Administration (NASA) for an expected annual return of around 5.5%. NASA is supposed to continue to rent the office building for the next decade, under its current leasing contract.
According to the Maeil Business Newspaper report, the South Korean companies will make a down payment later this month and close the deal around next January or February. The office building has been used by NASA for 26 years.
Small and medium-sized Korean brokerage houses have been joining forces to chase overseas real estate assets, with an aim to sell down their stakes to domestic pension and savings funds which are keen to diversify into offshore alternative investments for better yields.
After intense competition drove the U.S. real estate prices sharply higher, however, the National Pension Service (NPS), Korea Post and Korea insurance companies are now shifting towards mezzanine debt investments in the U.S. property market from equity purchase, their senior officials had said at the ASK 2016 Global Real Estate & Infrastructure Summit hosted by the Korea Economic Daily last week.
By Taeho Kim
<Edited by Yeonhee Kim>