Korea Investment & Securities Co. Ltd. is seeking to raise 55 billion won ($49 million) from individual investors to fund its 124 billion won ($110 million) acquisition of a Milan office building in Italy.
It has just launched a public fund for the tower which Milan-based tire maker Pirelli uses entirely as a global R&D center under a lease until December 2032, according to Korea Investment on Feb. 20.
The fund with a five-year term is reportedly expected to yield around 7% per annum, including a hedging premium of 2% points, or the difference in borrowing costs between Europe and South Korea.
For the acquisition, Korea Investment Management Co. Ltd., an affiliate of the brokerage firm, borrowed 69 billion won, or 60% of the purchase price, from Italian lenders at an interest rate of about 2%, the company said in a regulatory filing earlier this week.
They bought the property from Kryalos SGR, an investment firm.
The 57,634-square-meter building, located at Viale Alberto e Piero Pirelli 27, Milan, was built in 1998 and renovated in 2010.
Korea Investment said that it will seek to exit the investment after three years to maximize returns.
The fund will be currency-hedged for the whole investment principal and 80% of dividend incomes, while paying out dividends twice a year.
It will take at least 5 million won from an individual between Feb. 19 and 21 and be listed on the Korea Stock Exchange within 90 days of the launch.
Retail funds for global real estate investment are increasingly gaining the attention of South Korean individual investors turning away from range-bound stock markets and the domestic property market in the wake of tightened regulations on property speculation.
Korea Investment has been aggressive in real estate investments in diverse regions, ranging from the US to Paris, Belgium and Australia.
<Edited by Yeonhee Kim>
(Updated on Feb. 21, 2019 to add more details from Korea Investment Management’s regulatory filing.)
(Photo: Kryalos SGR)