South Korea’s IGIS Asset Management Co. Ltd. is tapping domestic insurance companies to sell mezzanine loans of about 150 billion won ($130 million) secured by a Manhattan office building which Google Inc. has been leasing since late 2014.
The mezzanine debt with the duration of five to six years will be issued for refinancing of the 11-story building at 85 10th Avenue in Chelsea, New York, and is expected to offer a mid-4% annual return, according to investment banking sources on Nov. 16.
The property, built in 1913, is owned by Vornado Realty Trust, a real estate investment trust, and Related Companies, a real estate firm. Google rents most of the office space, as it has been expanding its presence in Manhattan beyond its New York headquarters at 111 Eighth Avenue. The building is near the West Side Highway and the High Line, and had been used as a Nabisco cookie factory.
“Not only the borrower has a good credit rating, but the asset has a good investor protection. When a vacancy happens during the contract period, the tenant needs to pay a penalty for the remaining lease term,” said a property industry source.
It is not known which of the owners of the building is issuing the debt, and how much the mezzanine financing from South Korea will represent in the total refinancing package for the office building.
IGIS Asset plans to complete the mezzanine loan sale to five to six South Korean insurance companies by December. It is now in due diligence of the property in New York, together with a group of South Korean insurance firms.
“It is attractive because it is a prime office building located in the spotlighted area in Manhattan and leased to a global company in a long-term contract,” the Maeil Business Newspaper quoted an unnamed investment banking source as saying. “The investment satisfies the appetite of domestic insurance companies which focus on a steady stream of incomes, rather than capital gains from a sale.”
By Daehun Kim
<Edited by Yeonhee Kim>