Korean Fund Manager Provides $126M Loan for Toronto Hotel

Princes Gates Hotel LP, owner of Hotel X Toronto, will use the funds to refinance the newly opened, 404-key lodging destination.
Hotel X Toronto
Hotel X Toronto

KTB Asset Management Co. Ltd. continues to expand its presence in the North American commercial real estate debt market with a recent transaction in Canada. The Korean real estate fund manager originated a loan of CAD $165 million, or approximately $126.2 million, for Princes Gates Hotel LP’s refinancing of the 404-key Hotel X Toronto.

KTB provided Princes Gates—the hotel ownership entity that consists of real estate investors Henry Kallan, Alex Rovt and Joshua Durst—with a five-year, non-recourse loan carrying a fixed rate.

KTB is no novice in the Canadian market; however, the company’s financing for Hotel X marks one of its first of what will likely be many large loans north of the U.S. border.

“The Canadian commercial real estate market has shown strong growth in all sectors for several years with many that are overly crowded with local lenders,” Jaesang Eum, head of global alternative investments with KTB Asset Management Co. Ltd., told Commercial Property Executive. “In major markets in Canada, we see office vacancies decreasing, hotel RevPar continuing to grow, and residential development expanding. Given the favorable currency hedge costs that currently exist, KTB wants to provide greater opportunities for Canadian real estate owners.”

SOLID COLLATERAL  

Designed by architectural firm Norr Ltd., Hotel X made its debut with a soft opening in April of 2018, boasting a coveted waterfront location at 111 Princes’ Blvd. within the 192-acre Exhibition Place complex. Further distinguishing the 30-story hotel are its sports and entertainment segments, which include a 90,000-square-foot, private member sports club, a 60-seat screening room and 250-seat cinema. According to Rosenberg & Estis PC, the law firm that represented the Kallan et al in the loan transaction with KTB, as well as a $100 million construction loan deal in 2015, Hotel X’s development cost totaled approximately$250 million.

KTB, which will manage the loan in a fund on behalf of a group of Korean institutional investors, turned to Bridgerock Realty Advisors LLC to serve as its local advisor on the deal and to take on the role of ongoing servicer. Ken Picache of Chelan Advisors LLC and Paul Faver of JB Real Estate Advisors LLC advised Princes Gates on the transaction.

A growing attraction

While KTB is just building up its presence in Canada, the company has long been keen on the U.S.  market, as have other South Korean investors. Transactions on the real estate debt side over the last several months include a $475 million loan for RFR Realty’s refinancing of the 530,000-squrae-foot 285 Madison Avenue office tower in Manhattan—provided by KTB.

South Korean investors accounted for 34 percent of real estate debt activity globally in 2017, marking a 3 percent year-over-year increase that was also seen among Japanese investors, according to a report by alternative asset industry analysis firm Preqin. “These trends could be reflective of the general investment and regulatory climate in these countries, whereby Japan- and Korea-based investors are increasingly looking to allocate capital to alternative assets,” per the report.

For KTB, the world remains its investment oyster, but the company is pushing Canada higher up on its radar. “Although KTB will continue to invest in gateway cities worldwide, our top priority is Canada. Our interest is not limited to Toronto, but includes Vancouver and Montreal as well as the Edmonton/Calgary area where we expect a rebound as oil prices continue to recover,” Eum said.

Image courtesy of KTB Asset Management