Hana Financial Investment Co. Ltd. has underwritten a luxury hotel development in New York with a $145 million loan, saving the project from bankruptcy, as South Korean brokerage firms are venturing into value-add and opportunistic real estate projects beyond overpriced properties.
The loan for the 96-room hotel development at 456 Greenwich Street in Tribeca consists of a $95 million senior tranche for resale to global investors and a $50 million mezzanine loan for domestic investors, according to a Hana Financial source on Nov. 26.
Part of the mezzanine note could be sold to global investors, he added.
The loan with a three-year term will carry an interest rate of LIBOR plus 8 percent, the Real Deal, a US real estate news provider, reported in October.
Hana directly sourced and underwrote the financing for what it saw as a niche investment, following two financing deals it had provided for New York hotel developments since the beginning of this year.
It is the first construction financing the project has secured since the land was leased for the hotel development in 2013, according to the Real Deal.
CBCS Washington Street AP, a joint venture of Caspi Development and Mactaggart Family & Partners, leased the land from the Ponte Family in 2013. But it was forced into bankruptcy because the landlord reportedly balked at standard financing covenants.
The hotel under the Hotel Barriere Le Fouquet brand is scheduled for completion in 2022.
In October, CBCS announced that it secured $135 million in new debt and equity financing from Hana Financial Investment.
But the Hana source told the Korean Investors that the loan size is $145 million.
Amid growing interest in overseas project financing, some asset managers in Korea cautioned that they could be hit by unpredictable changes to deal structures, although the papers and contract clauses look perfect at first.
But the Hana source argued that it took a lesson from the recent cases where domestic investors faced losses from overseas project financing investments, and thus thoroughly studied the reputation of the developer and its sponsor companies.
Further, it took out a guarantee insurance policy for the project with a leading insurance company.
“In the niche market in which global investment banks hardly participate, we cooperated with a top-ranked local law firm and directly provided the financing, reducing the chances of unpredictable factors arising,” he noted.
Earlier this year, Hana Financial underwrote $86 million mezzanine loan on the Margaritaville hotel development in Manhattan’s Time Square, helping clear the distressed note on the development.
For another long-delayed project in the US, Hana Financial and Mirae Asset Daewoo Co. Ltd. provided a combined $100 million in mezzanine financing for the Drew Las Vegas, taking over the loan from JPMorgan.
By Hyun-il Lee
<Edited by Yeohee Kim>
(Photo: Getty Images Bank)