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Mirae Asset explains 75% of capital raised, dispels market doubts
By Anna J. Park
As Mirae Asset Global Investments' plan of raising the necessary capital for the purchase of International Finance Center (IFC) Seoul, it faces unexpected stumbling blocks leading some financial industry watchers to cautiously speak of the possibility that the acquisition could fall through as the investment company still searches for an alternative plan to raise 4.1 trillion won ($3 billion) for the purchase deal, Tuesday.
The firm originally planned to raise about half of the money by establishing a REIT, or real estate investment trust. But the option had to be scrapped, as the government put the brakes on REITs.
The country's land ministry recently did not give the green light for Mirae Asset's planned REIT, owing to an excessive proportion of debt in the trust's structure. The land minister pointed out the REIT's structural design of raising 2.1 trillion won through debt while assigning the other 2 trillion won through equity investment represents an unbalanced weight of excessive debt, which may bring losses to investors.
With the failure to establish the REIT to fund the deal, Mirae Asset told The Korea Times Tuesday that the firm is now seeking alternative methods to raise the capital.
"Around 3.1 trillion won of the entirety of 4.1 trillion, or some 75 percent of the money has already been secured through equity investment and senior loans, while the remaining 1.1 trillion won would be raised through mezzanine investment," an official from the investment company said.
The firm added that it is also closely talking with major overseas investors, including GIC, a Singaporean sovereign wealth fund, and APG, a Dutch pension investment company, for their potential participation in equity investment of the fund.
However, some market watchers say there's a possibility that the deal may not be completed, due to the failure of securing enough capital within the necessary timeframe, rising interest rates, which put a combined burden on the firm ― much greater than previously estimated ― and other market uncertainties that loom large against the already shaky condition of the deal.
Regarding such concerns, Mirae Asset is showing a strong determination to implement the purchase deal, explaining that it is aiming to complete the deal as planned.
Since Mirae Asset was tapped to be a preferred bidder of the purchase deal in May this year, the company paid 200 billion won as a deposit to Toronto-headquartered Brookfield Asset Management, the owner of IFC Seoul, for the implementation of the deal. The Mirae Asset official explained that the deposit could be returned, according to the terms and conditions stated in the signing of the memorandum, in case the deal ends up falling through.
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