Hangang Asset Management Co. Ltd. has invested 50 billion won ($47 million) in a mezzanine debt on two luxury hotels in Orlando, Florida, on behalf of an unidentified South Korean institutional investor, participating in a refinancing package for the properties.
The debt, secured on Ritz-Carlton and JW Marriott hotels owned by Blackstone Group, has higher seniority than other mezzanine notes and is expected to deliver annual returns of 6 to 7% for a seven-year investment period, according to investment banking sources on Jan. 23.
It is part of Blackstone’s refinancing of debts on the two nearby hotels which it acquired through a blind-pool fund in 2014 and renovated throughout. The size of the refinancing was not immediately known.
Seoul-based Hangang sourced the deal directly through its New York office. It is rare for a South Korean asset manager to run an office in the US city for deal sourcing purpose.
“Domestic capital for US real estate investment is diversifying beyond office buildings in big cities. We will aggressively chase infrastructure assets such as solar energy facilities in North America,” Yoo-hoon Jeon, Hangang Asset’s chief executive officer, told the Korean Investors.
Since its inception in 2016, the asset manager has arranged a number of investments in mezzanine debts on US office buildings, and the purchase of an office building in Australia through real estate funds for South Korean institutional investors.
It currently manages 700 billion won of assets, including the 50-billion-won mezzanine debt on the two US hotels.
According to Asset Securitization Report in November 2017, Blackstone obtained a $540 million loan in refinancing on the two Orlando hotels from Barclays and Wells Fargo to pay off debt and cover costs.
In addition to the loan, the properties are indebted with two mezzanine loans totaling $90 million, the report added.
The two hotels have posted annual sales growth of an average 6% since renovated in 2014 and reported a 75% room occupancy rate, 10% points higher than the average of US resort hotels in 2017, the sources noted.
By Daehun Kim
<Edited by Yeonhee Kim>