Hyundai Investments Co. Ltd. has committed $250 million to a real estate debt fund of a joint venture between Related Cos, a US real estate developer and HPS Investment Partners LLC to invest in first lien mortgages, the South Korean asset manager said on Dec. 26.
Through Real Estate Credit Solutions (RECS) fund II managed by the credit investment venture, Hyundai will invest in a warehouse facility, or a credit line extended for the funding of mortgage loans, for an expected annual return of about 6% in dollar terms.
The credit facility, of which interest rates will change monthly, has a loan-to-value ratio of 45% or below, so it has a low default risk, the company added.
RECS II invests in mezzanine debt on commercial properties in US gateway cities.
Hyundai, wholly owned by Hyundai Marine & Fire Insurance Co. Ltd., raised the capital from South Korean insurance companies via a domestic vehicle for an investment period of up to eight years.
“Considering the changing needs of domestic insurance companies for alternative investments triggered by new regulations, we will continue to roll out products like this which generates an appropriate rate of return with a low risk,” Hyundai Investments’ CEO Young-cheol Lee was quoted as saying by local newspapers.
He refers to new solvency rules to be introduced in line with the 2021 adoption of IFRS17 which will extend the duration of liabilities at insurance companies.
Related Cos has invested in landmark projects, including the Hudson Yards development and Time Warner Center.
HPS is a privately-owned company, spun off from Highbridge Principal Strategies (HPS) of J.P. Morgan Asset Management in 2016. It focuses on credit investment on US commercial real estates.
Hyundai Investments plans to diversify away from office buildings in developed countries into warehouse, data center, shared office space and infrastructure facilities.
By Daehun Kim
<Edited by Yeonhee Kim>
Photo: Getty Images Bank