Hyundai arm raises $79m for Blackstone-backed hotel

South Korean savings funds and insurance companies are providing capital for the investment vehicle.

Hyundai Investment, the investment arm of Hyundai Marine & Merchant Insurance, has raised a real estate fund of 93 billion won ($79 million; €74 million) to invest in the Cosmopolitan of Las Vegas hotel, The Korea Economic Daily reported.

The fund will invest in mezzanine debt issued by Blackstone Group, the owner of the property, to refinance the resort. The fund is expected to deliver an annual return of 5 percent to 6 percent at floating interest rates on a monthly basis.

The two-tower complex Cosmopolitan resort includes a 110,000 square foot casino, 300,000 square feet of retail and dining space, a 40,000 square foot fitness centre and spa, a 1,800-seat theatre and 165,000-square-feet of meeting space.

The manager has raised capital from a group of South Korean saving funds and insurance companies with a maturity of two years and an extension up to five years. The investment reportedly accounts for about 20 percent of the mezzanine debt that owner Blackstone Group issued.

Hyundai Investment did not respond to request for comment.

Blackstone Group bought the hotel for $1.7 billion from Deutsche Bank in 2014, marking its first major investment in the casino business. By selling the property to Blackstone, Deutsche Bank had ended a six-year money-losing investment. The German lender took over the hotel after its developer Ian Bruce Eichner defaulted on a construction loan in January 2008, according to Bloomberg.

Hyundai has followed the footsteps of its Korean peers in shoring up its overseas real estate portfolio.

Many Korean investors have been increasing their portfolio exposure to overseas debt investment secured by real estate, as it satisfies the need for steady income, particularly for insurers. For example, Korean asset management firm IGIS has tapped local investors to make two mezzanine debt investments secured by a US office building recently while Meritz Real Estate Asset Management also invested in a loan secured by German real estate.

Hyundai also invested in Park Avenue Tower in New York, which Blackstone had reportedly acquired for $750 million in 2014.