Luxembourg-headquartered Sienna Investment Managers has launched a new consulting business to help Korean investors manage their troubled real estate investments in Europe.
Last month, the firm promoted its Seoul-based real estate executive Hee-Young “Hazel” Cho to head of Korea. In her new role, Cho will oversee Sienna IM’s real estate activities in Korea and expand the firm’s network of Asian investors, according to a statement. She will also be spearheading the new consulting business for Korean investors. Cho joined L’Etoile Properties’ Seoul office before the group was acquired by Sienna IM in 2022. L’Etoile Properties set up its Korean office in 2014 and around 30 percent of Sienna IM’s real estate capital now comes from Korean investors.
“We started providing consulting services for investors that are not our [existing] clients. With the price correction and growing refinancing pressure in Europe, many Korean investors need a third-party perspective on whether it is worth injecting equity into a particular asset because they can’t save every single building they own,” said Cho.
She pointed out that some investors own several offices within the same city in Europe and they would have to “cherry pick” which assets to save. Under these circumstances, many investors prefer to hear objective opinions from a third party to determine the value of the assets.
Before introducing the consulting services business, Cho had focused on improving communication between Korean investors and Sienna IM’s asset management team in Europe over the past two years.
“You have probably heard in the news that a lot of Korean-owned buildings in Europe were forced to sell because the entire equity layer got wiped out due to the valuation drop and higher borrowing cost. These buildings were not [worth] peanuts. And a lot of damage was caused by miscommunication and/or the lack of communication itself,” said Cho.
She pointed out that some European partners don’t necessarily understand how “complicated” and “tiring” the administrative and negotiating process is for Korean fund managers if they need to inject additional equity to save an asset. The role of Sienna IM’s Seoul business is to mitigate miscommunication issues across continents and cultures.
“Imagine there is an asset owned by a group of 13 Korean investors – the Korean fund manager will need to go to all the investors and get unanimous approval from them to approve funding. These investors all have their investment committees that they will need to persuade,” Cho explained. The prolonged process was often misunderstood by their partners as “unwilling” to save the asset and the asset would end up in a forced sale.
“And that’s why I believe this is a time to communicate more to make sure that there’s no discrepancy and or misunderstanding,” Cho added.
With that in mind, Cho expected Korean investors to slow down new overseas real estate deployments for now. “They do have dry powder. But they are saving the money just in case they must inject equity to save existing assets,” she explained.
While Sienna IM is actively managing the European assets for Korean investors and expanding its network of Asian investors, it is also looking for potential opportunities to invest in Korea on behalf of overseas investors.
“Because we have an office in Korea, a few of our Asian investors asked us about our views on the Korean real estate market. So that could be another new thing that we might add to our business in the future,” Cho said. “However, our main focus will remain on new investments in Europe. Anticipating a rebound for the second half of 2024, we will prioritize opportunistic, value-add and core-plus strategies.”
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