Korea Investment Management Co. plans to raise 104 million euros ($118 million) from individual investors in June to fund its 275-million-euro purchase of a new office building in Luxemburg fully leased to Deloitte.
It is the third public property fund launched by the South Korean asset manager this month alone for overseas property deals, targeting individual investors in pursuit of a steady stream of returns with low volatility.
Korea Investment is buying a 91% stake in the D. Square building located in the new district of Cloche d’Or, the company said in a regulatory filing this week.
Co-investor La Francaise Real Estate Partners will take the remaining 9% and manage the 31,208-square-meter building, completed in January 2019.
Consulting firm Deloitte is the single tenant until the end of January, 2034.
The six-year closed-end fund for the D. Square is expected to return mid-6% per year, a Korea Investment source added.
The consortium of Korea Investment and La Francaise has agreed to buy the 17-story building from Integrale SA and Ethias SA which acquired it for 225 million euros last year in the largest transaction value in Luxemburg for the year.
The acquisition price of 275 million euros include the net purchase price of 263 million euros and fees and other expenses, according to the filing.
They will borrow 161.1 million euros with a five-year term at a fixed rate of 1.33% per year, including the fixed swap rate of 0.11%.
PUBLIC FUND FOR AMAZON-USED LOGISTICS CENTERS
Supported by the public fund boom for overseas real estate investments, Seoul-based IGIS Asset Management Co. Ltd. plans to raise 100 billion to 200 billion won in a public fund in July. It will use the proceeds to acquire Amazon-leased logistics centers in Spain, France and the UK, MoneyToday reported on June 20, citing a company source.
Public funds launched for overseas real estate investments in South Korea had seen 490.3 billion won ($421 million) in new money inflows on the year to June 18, according to FnGuide, a data provider.
They appealed to individual investors with target returns of 5-6% per year, fully subscribed within a few business days.
Over the past five years, their cumulative returns were 25.56%, compared with 2.55% of domestic equities funds and 7.80% of domestic hybrid funds during the same period.
But their recent boom may reflect the difficulty the asset managers and brokerage firms have had in selling them down to institutional investors, after they snapped up prime buildings in Europe and the US.
Intense competition among Korean bidders for commercial real estates abroad have pushed their acquisition values higher and squeezed expected returns.
Earlier this month, Korea Investment rolled out a public fund to raise 68 million euros to buy a 99-year ownership on an office building in Brussels, Belgium, just after closing a 63-billion-won public fund for a Tokyo building.
In February, it raised 55 billion won in a public fund to acquire a Milan office building.
<Edited by Yeonhee Kim>