In February 2020 ADM Capital exited from Project Runway, a December 2018 mezzanine financing for the recapitalisation of a 33,000 sqm, five floor office building in Bundang, Korea, a populous and wealthy suburb of Seoul. The USD24m ADM Capital loan facility was the first of three mezzanine loans across two cities negotiated with the same Promoter and borrowing entity. At the time of the financing, Project Runway was 57% occupied. The Promoter’s business plan was to repositioning the building into mixed retail and office use, but strong demand for the vacant space resulted in a quick lease-out and early sale of the building.
The ADM Capital loan was structured with a cash coupon and redemption premium providing a contractual 18% IRR. Additional upside was negotiated via a share in profits from the sale of the property. Downside protection on the loan was provided, inter alia, by a share pledge from the Borrower, board seats, cash monitoring, personal and corporate guarantees and cross-guarantees with other real estate assets.
Following the sale of the asset in February 2020, the ADM Capital loan was repaid in full generating a gross IRR of 21.3% and a cash-on-cash multiple of 1.26x.