› › Mezzanine Financing In United States Real Estate And Korean Institutional Investors

Mezzanine Financing in United States Real Estate and Korean Institutional Investors

Author : Sang Hoon Jeon

Publisher :

Page : 97 pages

File Size : 41,29 MB

Release : 2015

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Book Description

Situated in the middle of the capital stack of a property, mezzanine financing in real estate has been established in the form of B-notes, mezzanine loans and preferred equity, allowing the borrower to reduce its equity investment. Emerged in the early 2000's, the US real estate mezzanine market has rapidly expanded mainly due to the credit crunch following the Global Financial Crisis that widened the funding gap between the senior debt and the borrower's equity and, thereby, opened investment opportunity for mezzanine lenders to fill the gap. Meanwhile, major Korean institutional investors, categorized into pension funds, mutual aid associations, life insurers and a sovereign wealth fund, had increasingly invested in foreign real estate, particularly in the form of equity investments in order to enhance investment returns and diversify their portfolio. As asset prices are approaching the pre-crisis level, however, they have started invested in debt products instead of equity investment, focusing on mezzanine debt mainly in the US and UK markets. The purpose of this thesis is to identify the mezzanine investment opportunity in the US real estate market for Korean institutional investors. The US real estate mezzanine investment section introduces the elements of the mezzanine market and investigates the emergence and evolution of the market and specific investment strategies through publication review and an open-ended interview with a US investment manager. The Korean institutional investor section introduces the profile of major Korean institutions and looks into the market environment that led them to move toward debt away from equity and to prefer mezzanine debt for their overseas real estate investments through market research and open-ended interviews with major Korean asset managers. This thesis ends with defining mezzanine investment opportunity and risk in the US real estate market for Korean institutional investors. After a thorough research, it is found that the US mezzanine market is expected to keep creating investment opportunity as long as the funding gap exists. Also, the research makes it clear that mezzanine debt commands higher returns compared to levered equity investment, drawing Korean institutions who pursue higher risk-adjusted returns while avoiding equity investment due to compressing cap rates. As being most advanced, experienced, established and biggest, the US mezzanine market can be the best target market for Korean institutions. However, they have to take into account the current issues of diminishing premium on mezzanine debt and increasing default risk.



Portfolio Allocation for Korean Investors in the US Real Estate Market

Author : Chaungwon Cho

Publisher :

Page : 53 pages

File Size : 45,33 MB

Release : 2017

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ISBN :

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Book Description

The purpose of this research was to explore portfolio diversification by property type for Korean institutional investors in the U.S. real estate market. In the process, we analyzed the rapidly increasing Korean investment in the U.S. real estate market and identified the points cross-border investors should consider for proper asset diversification by property type. One of the main reasons investors make cross-border investments is to diversify their portfolios. Thus, cross-border investors need to properly diversify their investments by considering correlations between foreign and domestic properties. However, Korean institutional investors have shown an apparent preferential tendency for the U.S. real estate market, much more than other cross-border investors, and as such, they risk under-performing compared to investors with more diversified portfolio strategies. Therefore, in this research, 12 optimal portfolios were calculated by applying Markowitz's modem portfolio theory. Following this, the Sharpe ratios of calculated models without limitations of investment were compared to investment solely in Korean properties and U.S. office properties by Korean institutional investors. These analyses revealed considerable inefficiencies in the current international investment trend of Korean institutional investors. In addition, the comparisons of the optimal portfolios with correlations from more recent market data suggested that if Korean institutional investors continue investing in only office properties in the U.S. real estate market, their investment inefficiencies will become much larger than they currently are. Thus, we concluded that they should diversify their investment in U.S. residential, industrial, and retail properties and Korean properties rather than just investing in U.S. office properties and Korean properties.



Chapter 9

Author : Andrew Berman

Publisher :

Page : 22 pages

File Size : 49,24 MB

Release : 2017

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Book Description

In the last 10 years, the commercial real estate market has witnessed drastic changes in the types and volume of nontraditional financing methods. Before the recession that began in late 2007, unprecedented growth took place in two types of non- traditional financing: mezzanine debt and preferred equity. During that time, real estate borrowers had easy access to capital with loan-to-value ratios that sometimes exceeded the value of the property, and lenders could earn high interest rates and fees from these riskier financings. In the years following the 2008 recession recession, however, traditional mortgage lenders imposed tighter underwriting standards, and real estate owners and developers competed for the limited sources of available capital. As a result, the need for alternative funding sources increased. This provided an opportunity for a new group of lenders to enter the market to provide liquidity and additional capital. These nonbank financial institutions and hedge funds (many with billions of dollars under management) looked for opportunities to provide real estate financing during the volatile time period immediately following Lehman's collapse and the ensuing financial meltdown and continue to do so now.With mezzanine debt and preferred equity investments, real estate owners could obtain much needed capital, and nonbank financial institutions and hedge funds could enter the finance markets and earn high interest rates and fees from these riskier and nontraditional financings. Real estate investors and scholars view these nontraditional financings (i.e., preferred equity and mezzanine debt) as a major way to fill the “financing gap” between the senior mortgage debt and the owner 's equity. This chapter discusses the risks and opportunities of these two types of nontraditional real estate financings. It also examines how investors effectively manage the inherent risks of, and create opportunities with, mezzanine loans and preferred equity investments.This chapter is organized as follows. The first part focuses on mezzanine loans and describes the legal and economic structure of mezzanine financings, along with the investment opportunities, and the business risks, of mezzanine loans. The second part focuses on preferred equity investments and also examines the legal and economic structure of these equity investments, along with the investment opportunities and risks of preferred equity.



Mezzanine Financing

Author : Luc Nijs

Publisher : John Wiley & Sons

Page : 530 pages

File Size : 27,76 MB

Release : 2013-12-09

Category : Business & Economics

ISBN : 1119941814

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Book Description

An in-depth explanation of mezzanine finance Mezzanine finance products, which have grown increasingly popular in recent years, involve a unique and complex form of analysis because of their hybrid nature. Because mezzanine finance involves no collateral, it accentuates legal terms, term sheets, and contracts, in addition to depicting dynamics of both debt and equity. Experienced chairman, lecturer, and professor of investment banking Luc Nijs presents readers with a thorough description of product groups, structuring and pricing, and cultural discrepancies in terms of regulation and application in Mezzanine Financing: Tools, Applications and Total Performance. Nijs analyzes common triumphs and failures encountered in mezzanine financing, and he discusses techniques for risk analysis and risk mitigation. A final study of international capital markets, their products' relevance, attractiveness, and liquidity, and the effects on pure equity/fixed-income risk concludes the book. Conveys a professional's advice through case studies of various regions, industries and contexts Provides the only complete analysis of mezzanine finance as no other books take on the topic as their only subject Details an increasingly popular and globally relevant subject in finance Those seeking a detailed explanation of the complexities within mezzanine financing will encounter a professional account in Nijs's book.



Mezzanine Financing

Author : Anthony J. Zezzo

Publisher :

Page : 64 pages

File Size : 33,11 MB

Release : 2001

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ISBN :

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Seeking Shelter on the Pacific Rim

Author : Gary Dymski

Publisher : Routledge

Page : 390 pages

File Size : 42,13 MB

Release : 2018-10-24

Category : Business & Economics

ISBN : 1315499711

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Book Description

This innovative book analyzes the changes that financial globalization is bringing about in the housing and home-finance markets of the United States, Japan, and South Korea, with special attention to the circumstances of women in obtaining housing, credit, and personal security. The book's focus on changes in the residential and housing finance markets serves as a window for an integrated examination of how the liberalization of national financial markets has affected the relationship among all players in each of the three economies - government, markets, and individual citizens. Through this examination Housing Finance Futures develops a new critical response to economic globalization based on a groundbreaking concept, the social efficiency of policy and market shifts.



Once a Mortgage, Always a Mortgage - the Use (and Misuse) of Mezzanine Loans and Preferred Equity Investments

Author : Andrew Berman

Publisher :

Page : 53 pages

File Size : 30,90 MB

Release : 2006

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ISBN :

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Book Description

The mortgage remains one of the most common and successful techniques to finance real estate transactions. In the last 25 years, mortgage loans have also been sold in the secondary market and included in mortgage-backed securitizations. The amazing growth of mortgage securitizations has also led to the development of novel financing techniques, including mezzanine financing and preferred equity investments. This article discusses the historical development of real estate financing from the early beginning of mortgage law and the equity of redemption through the modern advent of mortgage-backed securitizations (MBS) and other non-traditional financings. It argues that the phenomenal success of real estate securitizations along with the growth and power of the national credit rating agencies gave birth to two new popular non-traditional financing techniques - mezzanine loans and preferred equity investments.Employing a detailed explanation of the legal structure and basic underpinnings of mezzanine loans and preferred equity investments, this article argues that lawyers carefully structure mezzanine loans and preferred equity investments to avoid many of the borrower protections associated with junior mortgages, and that these new financing techniques are simply modern day mortgage substitutes. The article concludes that courts should apply traditional property law and recharacterize these financings, thereby treating junior mortgages, mezzanine loans, and preferred equity financings similarly.





Take the Money and Run

Author : Eric C. Anderson

Publisher : Bloomsbury Publishing USA

Page : 264 pages

File Size : 38,64 MB

Release : 2009-03-20

Category : Political Science

ISBN : 0313366144

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Book Description

In this book, an expert in the field explains why the United States is the world's largest debtor nation and how America's relationship to creditor states is of growing economic, diplomatic, and even national security concern. Foreign countries are not merely investing in U.S. corporations but are purchasing them outright: Abu Dhabi bought Citigroup securities, Kuwait purchased a large block Merrill Lynch stock, and China bought Morgan Stanley's convertible securities-and this happened before the September 2008 meltdown of Wall Street. The means by which wealthy foreign states make these purchases are sovereign wealth funds, their surplus capital that they are seeking to invest in order to generate the greatest return. Currently, the largest sovereign wealth funds are held by the United Arab Emirates (of which Abu Dhabi is part), Norway, Singapore, Kuwait, and the People's Republic of China; Qatar and Libya are also in the top ten. The United States has no such fund (although the state of Alaska does). This book takes a close look at China's and Norway's sovereign wealth funds to explain how they work. The author also uses domestic examples (Harvard's endowment, the California's state employees' retirement fund) to propose how the United States could create a sovereign wealth fund, speculating that such a fund could solve the looming Social Security funds shortfall. Most important, the book elucidates the national security aspects of not having an American sovereign wealth fund when so many other nations-both friend and foe-have them.