Korean Owners Default on Loan Linked to Frankfurt Skyscraper

(Bloomberg) — The Korean owners of one of Frankfurt’s best known skyscrapers failed to agree a restructuring plan for a loan tied to the building, paving the way for insolvency proceedings.

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A fund managed by IGIS Asset Management confirmed the event of default for the debt linked to Trianon tower in Germany’s financial capital. The loan had been subject to a standstill agreement while the investors, which part own the building, sought to thrash out a deal with their lenders but talks have since broken down and the agreement has now lapsed, the asset manager said in a filing on its website.

“The company is expected to file for insolvency proceedings within three weeks of the occurrence of the insolvency event,” it said in the statement.

Korean investors that bet on large office and logistics properties in Europe have been among the most prominent losers of the sharp correction that’s gripped the continent’s commercial real estate market since the advent of higher interest rates. Their focus on tenant credit worthiness over environmental credentials and location has left them exposed to shifting trends that have hit some office properties hard as companies seek modern, green space with the best amenities.

IGIS Asset Management and Hana Financial bought the Trianon property for about €670 million ($729 million) in 2018, financed with a €375 million loan from Dutch bank ING Groep NV that was subsequently syndicated to a consortium of other lenders. That loan matured last year and the owners and lenders have subsequently endured a series of attempts to sell or refinance the property that have been thwarted by a plunging valuation.

Rising rates have been particularly painful for German property values which had reached record levels during the free money era. The Trianon tower stands out because key tenant DekaBank Deutsche Girozentrale is departing this year. That’s further dented the building’s valuation as appraisers weigh up the vast cost of upgrading the building to lure new tenants.

CBRE Group Inc. was appointed to find a buyer last year and was seeking about €350 million, according to a React News report at the time, but the process stalled.

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