Over 10 Trillion Won Overseas Real Estate Public Fund Faces 'Red Light'... "Signs of a Second Fund Crisis"

As the real estate market rapidly declines mainly in the US and Europe, overseas real estate public offering funds, in which domestic individual investors have more than 1 trillion won tied up, are also facing an emergency.

According to the overseas real estate public offering fund sales status data submitted by the Financial Supervisory Service to Yoon Chang-hyun, a member of the People Power Party, on the 5th, a total of 14 overseas real estate public offering funds have been sold to individuals since 2018, with 27,187 individuals investing a total of 1.0478 trillion won. This amount is much larger than the 227.9 billion won invested by 381 corporate investors.

Korea Investment & Securities sold the most at 508.7 billion won. Next were KB Kookmin Bank (277.9 billion won), Hana Securities (91.1 billion won), Hana Bank (91.0 billion won), Mirae Asset Securities (79.5 billion won), Eugene Investment & Securities (53.9 billion won), Daishin Securities (52.8 billion won), Woori Bank (48.0 billion won), DB Financial Investment (33.5 billion won), and Hyundai Motor Securities (18.3 billion won), in that order.

By asset management company, Korea Investment Real Asset Management has the largest scale at 496.3 billion won, followed by Aegis Asset Management (473.7 billion won), Mirae Asset Global Investments (92.6 billion won), Hana Alternative Investment Asset Management (92.5 billion won), Kiwoom Asset Management (68.0 billion won), and Hyundai Asset Management (52.6 billion won).

The maturities of overseas real estate public offering funds are concentrated next year. About half of the individual investors who invested in overseas real estate public offering funds since 2018 will reach fund maturity next year. The personal sales amount of the four funds maturing next year is 410.4 billion won, and the number of individual investors is 10,965, the highest on an annual basis.

The problem is that the deteriorated overseas real estate market shows little sign of recovery. Globally, due to the central banks’ trend of raising benchmark interest rates, dividend yields have decreased, and due to the increase in hybrid remote work after COVID-19, office lease demand has declined, causing overseas office sale prices to show a downward trend.

Since the first quarter of last year, the asset value of buildings near European transit stations has fallen by more than 25%, and European commercial real estate transaction volume has also decreased by 60%.

The office vacancy rate in New York is 20%, and prices have dropped by 22%. The average office transaction price in Manhattan fell from about $1,000 per square foot at the end of 2021 to $778 per square foot in the first quarter of this year.

Assemblyman Yoon Chang-hyun said, "The primary creditor of overseas real estate is banks, and domestic public offering funds are subordinate creditors," adding, "If a building with an LTV of 60% falls in price by 20%, the loss rate of the public offering fund reaches 50%, so measures such as introducing refinancing funds should be urgently prepared to prevent it from expanding into a second fund crisis."

This content was produced with the assistance of AI translation services.