600 Bil. Won Invested by South Korean Investors
Principal and interest payment has been suspended since May 8 in the The Drew Las Vegas resort development project. In other words, the three trillion won project is currently in default.
South Korean investors have invested a total of 600 billion won in the project. The investors include Mirae Asset Daewoo, NH Investment & Securities, Hana Financial Investment, Kangwon Land and a Hyundai Motor Group subsidiary. One of the securities companies explained that the project is not in default yet and no investment losses have been realized although a payment deferment request has been made in relation to local conditions.
The project is to build a 68-story building, a five-star hotel with 3,780 guest rooms, a casino, a theater, and so on connected to the Las Vegas Convention Center. The project started in 2007 before suspension due to a global financial crisis. It was resumed in 2017 by acquisition by real estate developer Witkoff Group and financing was completed in January this year. However, the COVID-19 pandemic broke out, causing re-suspension.
The problem is that South Korean investors have made huge investments in American hotels and resorts like The Drew Las Vegas. Even excluding the 15 hotels Mirae Asset is planning to buy from Anbang Insurance, the total investment for the past three to four years exceeds one trillion won. “Most of the hotel assets in the United States have requested investment period extension,” said one of the investors, adding, “The hotels took a more direct hit from the pandemic due to their profit volatility higher than that of office buildings.”
The current payment deferment in the The Drew Las Vegas project is applied to senior investors, which are U.S. banks constituting half of the project. However, the South Korean mezzanine and equity investors constituting the other half may have to face principal losses if the senior investors give up and dispose of their assets.