This article was displayed on the ChosunBiz MoneyMove (MM) site at 5:11 p.m. on Dec. 11, 2025.
Korea Investment Real Asset Management is making an all-out effort to salvage the Milan fund. With the Belgian fund confirmed as a total loss and the Luxembourg and New York funds on the brink of event of default (EOD), it appears to be trying to at least preserve the relatively sound Milan asset.
According to the investment banking (IB) industry on the 11th, Han투 Real Asset is pushing to sell the Pirelli research and development (R&D) center, the underlying asset of the Milan fund. The target timing is the second half of next year. It attempted a sale in 2022 with a local manager, but the plan fell through because it failed to find a buyer amid a slump in the European real estate market.
Han투 Real Asset is discussing a lease amendment with Pirelli, taking into account the recent decline in asset value and tenant risk. It is reviewing a plan to delete the early termination option and extend the lease term. In return, it is said to have proposed incentives such as partial rent reductions. However, as Pirelli headquarters' internal review drags on, changes to the lease contract are not expected to produce immediate results.
The Milan fund is a public overseas real estate product that invested in the Pirelli center in 2019. It raised 54.6 billion won from institutional and retail investors through Korea Investment & Securities and added a loan of 52.8 million euros (about 75 billion won at the time) to purchase the asset for a total of 88 million euros (about 125 billion won). Because the purchase price was lower than the appraised value (90.5 million euros), it was evaluated as a "successful investment" at the time.
But after 2022, the European Central Bank (ECB) raised its key rate from near zero to the 4% range, and the situation changed rapidly. When rates rise, the present value of future revenue obtainable from real estate falls, bringing down asset prices. A local appraisal firm assessed the value of the building at 86.7 million euros in September. That is below the purchase price.
Sale delays are increasing not only the decline in asset value but also the burden of loan interest. The cumulative one-year return is 0.52%, relatively better than other overseas real estate funds such as Belgium, Luxembourg, and New York, but investor anxiety remains. That is because dividend payments have been withheld after a "cash trap" condition was attached during the loan maturity extension process. A cash trap refers to lenders such as banks controlling cash to prioritize repayment of principal and interest on the loan and protect the asset.
An industry official said, "The funds secured locally by the fund will be used for FX hedge settlement and to amend the lease contract," and explained, "We are pushing facility investments to raise asset value, but securing cash resources is necessary, so all distribution resources have been withheld."
Meanwhile, Han투 Real Asset's New York fund has faced an EOD crisis. Both the asset sale to address maturity and coordination with co-investors failed. It barely bought about two months by signing an agreement with lenders to defer the exercise of collateral rights. The collateral deferral expires on Jan. 30 next year. If a maturity extension or sale does not occur within this period, the collateral rights will be exercised. Public investors in the subordinated tranche will inevitably suffer principal losses.