The Korean Teachers Credit Union and TIAA-CREF are staking a claim on Manhattan’s Socony-Mobil building in the first investment of a $1 billion joint venture.
The partners last week acquired a $175 million loan on the landmark office tower across the street from the Chrysler Building, according to Suzan Amato, head of managed accounts and joint ventures in global real estate at New York-based TIAA-CREF. The financing was part of David Werner’s $900 million purchase of the property this year.
Asian investors, seeking higher returns and a safe haven for cash, are the source of some of the global flood of money into Manhattan real estate that’s pushing office-building values to records. While China has been the top Asian buyer in New York, investors from Korea andSoutheast Asia are poised for more deals as the relatively shallow real estate markets in their home countries become saturated, according to Amato.
“Asian countries are on a rapid growth trajectory,” she said. “This is a very fertile area for us.”
South Korea is the fourth most-active Asian equity investor in Manhattan property, behind China,Singapore and Australia, according to Real Capital Analytics Inc., a real estate research company.
Rather than buying equity interests in buildings, TIAA-CREF and KTCU are seeking to invest in mortgages backed by office towers, retail properties, warehouses and apartments in major U.S. cities. The venture between the two companies, which manage teachers’ savings in their respective countries, is 51 percent owned by TIAA-CREF and 49 percent held by Seoul-based KTCU.
“In the Korean investment environment, where interest rates remain low at about 2 percent, we believe this is a good opportunity to diversify the portfolio through investments in prime assets in theUnited States with strong fundamentals and steady income streams,” Sung-Seok Kang, head of global investments at KTCU, said in an e-mail. “We plan to expand this relationship further into other investment types.”
The Socony-Mobil investment is a mezzanine loan, which is junior to a first mortgage and pays a higher yield to compensate for the risk. Such investors typically have the right to seize the borrower’s equity in the event of default. KTCU last year underwrote $50 million in mezzanine debt on the Seagram Building, another New York landmark.
Mezzanine lending is a complex approach to property investment that not all foreign investors are comfortable with, said Ben Thypin, an analyst at New York-based Real Capital. Koreans typically prefer a direct ownership stake in a property because it gives them more control of the asset, he said.
Read More: http://www.bloomberg.com/news/2014-12-12/manhattan-towers-lure-koreans-in-1-billion-joint-venture.html
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.