Llease In Korea Loan Deal
Sydney Morning Herald
Saturday September 23, 2000
Lend Lease's Luxembourg-based global real estate investment fund and US investment bank Salomon Smith Barney have bought a portfolio of risky loans from Korea Exchange Bank worth $US436 million ($798 million), ranking as one of the largest single foreign investments ever made in South Korea.
The transaction also represents one of the largest single deals undertaken by Lend Lease in the Asian property market.
Analysts described the purchase as ``normal business" for Lease Lease Global Properties but suggested the choice of SSB, a subsidiary of Citigroup, as partner in the deal was of far greater importance. Lend Lease's real estate investment operations in the US account for about a third of the company's earnings. It has offices in most major cities in the US, although analysts believe there is ample potential for the company to increase its reach.
``One area that Lend Lease has recognised itself as being a little weak is their distribution channels to private clients and high net-worth individuals in the US," one analyst said. ``That SSB is involved is probably the more significant part of the transaction."
A Lend Lease spokeswoman acknowledged the potential for Lend Lease and SSB, which has an extensive private client stockbroking business, to work together on distributing products and services. ``Part of the Lend Lease approach is to enter into joint ventures or long-term relationships," she said. ``There are certainly opportunities going forward."
Lend Lease has invested $US50 million in Lend Lease Global Properties, giving it about 10 per cent of the fund.
Before the Korea loan purchase LLGP had assets of around $US400 million in the form of an office development in Britain, a shopping centre in Portugal and office space in Hong Kong. The majority of the Korea loans are secured against real estate assets in Seoul, Pusan, Inchon and other metropolitan areas.
LLGP chairman Mr James Quille said this was the fund's first investment in Korea. It is also the first major sale of non-performing loans by Korea Exchange Bank.
Typically, companies make money on such transactions by buying the debt portfolios for less than face value and then unwinding the loans at a profit, either through refinancing or liquidation.
``I think they will be pretty active in trying to expand their portfolio and wouldn't rule out more purchases in Korea, along with Thailand and Japan," the analyst said.
Shares in Lend Lease fell 9c to $19.61. The immediate outlook for the shares is tied to Lend Lease's ability to make another acquisition to boost its global real estate investment business.
© 2000 Sydney Morning Herald
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