South Korea’s KTB Asset Management has joined with two other Korean institutional investors to invest in $68.5 million of mezzanine debt secured by an office building in Manhattan, New York City.
The investment will deliver an annual return of mid-five percent and the term will terminate in 2012, according to a local press report.
The investment will refinance around 70 percent of a junior mezzanine loan provided by Blackstone Group in the $463 million acquisition by a US property management company and Chinese conglomerate HNA Group last year.
Blackstone was the sole mezzanine debt holder in the acquisition.
The new debt will have seniority over the 30 percent remaining mezzanine loans owned by Blackstone.
KTB Asset Management confirmed the information above but declined to comment further.
The 21-story office building is located at 850 Third Avenue in Midtown East, Manhattan. It has a gross leasable area of 57,000 square metres and its current tenants include the New York City Police Department, global TV network Discovery Communications and Radio One.
In the current low interest rate environment, Korean institutional investors seeking yield and cash flow have shown strong appetite for commercial real estate loans in the US. Compared with equity, debt investment satisfies their demand for a steady stream of income rather than a lump-sum capital gain from a sale.
Last month, global real estate investment management firm TH Real Estate formed a $1 billion joint venture partnership with The Korean Teachers’ Credit Union (KTCU) to invest in commercial real estate loans in the US.
Seoul-headquartered KTB Asset Management is an investment company founded in 1999 investing in both public equity and fixed income markets. The company had assets under management of KRW10 trillion ($8.8 billion; €8.2 billion) by the end of December 2015.