Meritz Real Estate Asset Management Co. Ltd. has arranged South Korean asset owners’ investment of around 260 billion won ($226 million) in 10-year mezzanine debt secured by 245 Park Avenue in Manhattan.
The loan was originated by JPMorgan to fund Chinese HNA Group’s $2.21 billion acquisition of the office tower from Brookfield Property Partners and the New York State Teachers’ Retirement System earlier this year.
Of 10-year, $1.75 billion syndicated loan extended to the Chinese conglomerate, JPMorgan reportedly provided 25%.
Unidentified South Korean pension and savings funds participated in the mezzanine financing for the office tower in midtown Manhattan via a vehicle established by Meritz Real Estate, according to investment banking sources on July 3.
The investment is expected to deliver an annual return of between 5% and 5.5%.
Tenants of the 158,000-square-meter skyscraper include global financial services companies such as JPMorgan, Societe Generale, Rabobank International, and Angelo Gordon. Major League Baseball is headquartered in the building.
Built in 1967, the office tower has 48 floors. Ninety-five percent of its rent space is leased and the remaining lease period of major tenants is more than 10 years.
South Korean brokerage and asset managers are shifting toward debt financing away from equity investment in real estate, daunted by the prospect of higher US interest rates and rising valuations.
“Equity investment transactions, in which local brokerage houses underwrote the whole tranche of overseas real estate (financing) last year for resale, are nearly non-existent,” an alternative investment official of a South Korean institution. “We are switching to debt investments, but the number of such investment cases is down because many of them were digested in the US.”
Meritz Real Estate, wholly owned by South Korea’s Meritz Financial Group, was launched last year for global investments. Its AUM came to 820 billion won at end-June.
Former real estate investment managers of Hyundai Asset Management Co. Ltd. are playing key roles in Meriz Real Estate which is led by Jun Hyun Shin, an ex-real estate investment head of Hyundai Asset.
By Daehun Kim
<Edited by Yeonhee Kim>