A consortium of Korea Investment & Securities Co. Ltd. and Hana Asset Management Co. Ltd. was recently picked as a new preferred negotiator of the NASA head office building in Washington D.C., a few weeks after local rival KTB Asset Management Co. Ltd. halted the property acquisition because of soaring funding costs, a newspaper reported on Dec. 6.
The consortium has adjusted the financing conditions for the purchase, estimated at 400 billion won ($343 million), in negotiations with the selling side to reflect the changed market situation in the aftermath of the U.S. presidential election, the Maeil Business Newspaper reported, citing investment banking sources. Its annual return target of 6~7% from the investment is even higher than KTB Asset’s target of about 5.5%.
In October, KTB Asset had been chosen as a preferred buyer of the building on behalf of small-sized domestic securities firms. But it put the transaction on hold shortly after the election of Donald Trump as U.S. president roiled global financial markets.
To finance the deal, brokerage house Korea Investment will launch a public real estate fund, through which it plans to sell its equity investment of 200 billion won, or half of the total acquisition price. The balance will be raised through loans.
Korea Investment bets on demand from individual investors for high-yielding overseas assets.
“Demand for prime real estate generating steady rental incomes is growing from retail investors, but there have been very few relevant financial products,” the daily quoted an unnamed IB source as saying. “In the case of overseas deals, it isn’t easy to produce a relevant product unless the company is big enough and has capabilities to do so.”
The consortium is working on detailed financing structure and fundraising schedule, aiming to close the transaction within the first quarter of next year.
The nine-story office building with a floor area of 56,200 square meters was remodeled in 2012 with the investment of 100 billion won, and NASA will continue to lease it through 2029.
<Edited by Yeonhee Kim>