Rising rates may affect Mirae Asset’s fundraising for IFC acquisition Higher rates make investors more cautious about investing in equity tranche

Translated by Ryu Ho-joung 공개 2022-05-16 08:05:40

이 기사는 2022년 05월 16일 08:03 더벨 유료페이지에 표출된 기사입니다.

Mirae Asset Global Investments may have trouble raising money to fund its planned acquisition of the International Finance Center Seoul, the landmark complex in the city’s major financial district Yeouido, as South Korean investors are getting less willing to invest in an equity tranche amid rising interest rates.

Canada-based Brookfield Asset Management named Mirae Asset Global Investments as the preferred buyer for IFC Seoul last week. The Seoul-based asset manager reportedly offered 4.1 trillion won ($3.2 billion) for the multi-use complex that consists of three towers.

Mirae Asset Global Investments secured an investment commitment from Mirae Asset Securities. The acquisition is expected to close in the third quarter of this year.

The key to closing the deal before the deadline is whether Mirae Asset will be able to attract sufficient interest from institutional investors for equity financing.

In 2016, Brookfield Asset Management acquired IFC Seoul for 2.55 trillion won, of which 1.6 trillion won was funded through loans secured by the property. The loans were refinanced and increased to 2.28 trillion won in November 2019. Even assuming Mirae Asset can take out the same amount of loans with the complex as collateral, it needs to raise a 1.82 trillion won equity financing from investors.

However, investors are becoming more cautious about equity investments because higher interest rates and increased borrowing costs mean lower equity return. Earlier this month, the US Federal Reserve lifted its benchmark interest rate by 0.5%, the biggest rate hike since 2000, and signaled more aggressive tightening ahead. This could lead to additional interest rate increases by the Bank of Korea.

Mirae Asset Global Investments plans to acquire IFC Seoul through a private real estate investment trust (REIT). Under South Korean law, a REIT can be exempted from a public listing if the country’s public institutions hold 50% or more of the REIT or 70% of its assets consists of rental houses.

However, South Korean public pension funds and mutual aid associations, such as the state-controlled National Pension Service, have shown little interest in IFC Seoul since it was put up for sale.

Apart from the expected return, they might have been wary of potential criticism about draining national wealth, industry watchers said. (Reporting by Gyoung-tae Kim)
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