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Photo = Yonhap news |
[Alpha Biz= Reporter Kim Sangjin] Korea Investment Real Estate Asset Management, a subsidiary of Korea Investment Trust Management, is on the brink of a total loss from its investment in Belgian commercial real estate due to a market downturn and subsequent default on debt obligations. Despite the building being leased to a government agency, the fund failed to sell the asset amid the real estate slump, leading creditors to enforce asset liquidation just six months after the default.
On December 16 (local time), Korea Investment Real Estate Asset Management was notified of the forced asset liquidation resulting from a senior loan maturity default concerning the "Korea Investment Belgium Core Office Real Estate Investment Trust 2 (Derivative Type)." The fund, which owned a stake in a Special Purpose Company (SPC) holding the asset, lost its entire shareholding, resulting in virtually total losses. The fund, previously tradable as a closed-end product, had its trading halted on December 18 until delisting.
Established in June 2019, the fund invested in a long-term lease of the Toison d'Or building, occupied by Belgium's Federal Public Service Buildings Agency under the Ministry of Justice. The fund raised 90 billion KRW through public and private offerings and secured the remaining purchase amount—189.8 billion KRW (1.453 billion EUR at an exchange rate of 1,300 KRW/EUR)—via local financing. Senior and mezzanine loans of 72.625 million EUR and 14.525 million EUR, respectively, were obtained.
The challenges arose in 2022 as inflation and rising interest rates caused a rapid downturn in the European commercial real estate market. The building’s valuation dropped from 146 million EUR at the end of 2020 to 132.5 million EUR by the end of 2022, with no subsequent reassessments. The fund’s net asset value also plummeted from its initial 90 billion KRW to 22.9 billion KRW as of September last year. Although the fund manager attempted asset sales and refinancing, the market’s continued decline led to failure. In June 2023, the senior loan reached maturity, resulting in a default.
Korea Investment Real Estate Asset Management sought to delay foreclosure by requesting a suspension of collateral enforcement, anticipating market recovery. The European Central Bank’s (ECB) decision to cut interest rates in June fueled hopes of a rebound in the office real estate sector. Consequently, the fund's maturity was extended from June 2023 to June 2029. However, with the market failing to recover as expected, the fund ultimately could not avoid losses.
Alphabiz Reporter Kim SangJin(letyou@alphabiz.co.kr)
