South Korean life and non-life insurance firms will provide about $240 million worth of senior financing for a historic 10-story office building in Washington D.C. for an annual interest rate of 4.45%, following a string of recent investments in property-backed senior loans by domestic financial services firms.
The Woodies building, built in 1897, is located in the East End of Washington D.C., a large office district. The Federal Bureau of Investigation (FBI) occupies 40% of the building’s space and will continue to lease it through November 2025. Other tenants include clothing stores as Forever 21, Zara and H&M.
South Korea’s IGIS Asset Management Co. Ltd. will manage the investment in the senior loans backed by the Woodies building through maturity of 2029, on behalf of the Korean insurers, according to investment banking sources on Nov. 2.
One of the sources said that FBI has an option to move out before the expiration of the lease contract, if it has its head office building built by 2022, but it has yet to start discussions with the U.S. government on the construction.
The Woodies building covers a floor area of 42,975 square meters, and extended and renovated in 1999 and in 2003~2005, respectively. In the underground of the building is a metro center station where three lines intersect.
Secured senior loans for offshore real estate has been luring domestic insurance companies with steady and relatively high returns. The 4~5% annual returns and the loan-to-value ratio of 60~70% mean that even if the property price tumbles by 30~40%, the principal will be protected.
In August Hanwha Life Insurance Co. Ltd. and three other South Korean insurers invested about $178 million in senior loans backed by a Google office building in Silicon Valley. The investment was made through a South Korean asset manager. In June six domestic institutions, including NH Life Insurance Co. Ltd., provided a total of about $200 million in senior financing for the Atlantic Building in Washington D.C. In February, KDB Life Insurance Co. Ltd. and three other domestic insurance firms invested about $100 million in senior loans secured by an office building in Miami.
By Hyunjin Lee
<Edited by Yeonhee Kim>