Major Participation by Domestic Financial Companies and Investment Institutions
Capital Reduction After Repaying Existing Acquisition Financing of 2.2 Trillion Won
All Investment Gains After Deducting Loans from Building and Hotel Sales
Brookfield Asset Management, a Canadian alternative investment firm, has completed the refinancing of acquisition financing worth 2.67 trillion KRW for the Yeouido IFC Building. With the funds raised, the company plans to repay the existing acquisition financing and conduct a paid-in capital reduction to recover most of its invested principal. If the company sells the held real estate in the future, it will repay the acquisition financing, and the remaining balance will be Brookfield's investment profit.
According to the investment banking (IB) industry on the 29th, Brookfield Asset Management has completed recruiting investors for acquisition financing worth 2.67 trillion KRW, secured by the Yeouido IFC Building and others. The loan was divided into senior debt of 2.4 trillion KRW and mezzanine debt of 270 billion KRW. Mezzanine debt ranks lower than senior creditors in terms of repayment priority and collateral enforcement. Brookfield provided three office buildings of the IFC Building (One IFC, Two IFC, Three IFC), the IFC Mall (commercial facility), and the Conrad Seoul Hotel as collateral during the fundraising process.
Major lenders including domestic financial institutions, pension funds, and mutual aid associations participated as a large lending group. Banks such as KB Kookmin Bank, NH Nonghyup Bank, and Shinhan Bank, along with insurers like Samsung Life Insurance and Samsung Fire & Marine Insurance, and pension funds made substantial investments in the senior debt. Mutual aid associations, securities firms, and capital companies funded the mezzanine loans. The loan interest rates were set at the mid-5% range for senior debt and mid-7% range for mezzanine debt.
Brookfield plans to use the raised funds to first repay approximately 2.2 trillion KRW of existing borrowings. With the remaining approximately 470 billion KRW, it will proceed with a paid-in capital reduction for four special purpose companies (SPCs) established for the acquisition of the IFC Building. Upon completion of the capital reduction, Brookfield will be able to recover the entire invested principal of 750 billion KRW put into the IFC Building acquisition. Brookfield acquired the IFC Building in 2016 for 2.55 trillion KRW, borrowing 1.8 trillion KRW in acquisition financing. When refinancing the acquisition financing in 2019, it had already recovered 480 billion KRW out of the actual investment of 750 billion KRW.
If Brookfield succeeds in selling the IFC Building and Conrad Hotel either as a whole or separately in the future, it will repay the acquisition financing, and the remaining sale proceeds will all be investment profits. When it attempted a full sale to Mirae Asset Global Investments in 2022, the value was 4.1 trillion KRW. Maintaining that price would mean a net investment profit exceeding 1.5 trillion KRW after deducting acquisition financing. However, the acquisition was canceled because Mirae Asset Global Investments, the preferred bidder at the time, failed to obtain approval from the Ministry of Land, Infrastructure and Transport for the REITs (Real Estate Investment Trust) it planned to establish to raise acquisition funds.
After the full sale fell through, Brookfield also attempted to sell the Conrad Hotel separately. An IB industry insider said, "As the value of Yeouido offices and hotels continues to rise, the scale of acquisition financing has significantly increased with each refinancing." He added, "Brookfield is expected to recover all invested principal after 8 years of investing in the IFC Building and secure at least a 60% investment return upon future sale."
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