CapitaLand has rolled out a “Whole Loan” financing structure in Korea, a debt instrument still uncommon in the local market but widely utilized in developed capital markets. The move signals growing appetite for more sophisticated lending strategies that allow investors to maximize leverage and returns.

According to investment banking sources on September 25, CapitaLand extended a ₩95.6 billion ($70 million) loan—covering 75% of project cost—for Cube Industrial Asset Management’s logistics development project in Yangju, Gyeonggi Province.

What sets the deal apart is CapitaLand’s use of a Whole Loan. Unlike conventional project financing in Korea—where loans are split into senior, mezzanine, and junior tranches, often creating conflicts of interest— a Whole Loan involves a single lender providing the full amount, retaining both control and flexibility.

For borrowers, the structure offers simplicity and potentially higher leverage since they negotiate with just one counterparty. For lenders, Whole Loans can later be tranched and sold, or used as collateral for additional financing—unlocking leverage opportunities.

CapitaLand plans to fund ₩60 billion of its Whole Loan exposure through a “Loan-on-Loan” arrangement, effectively borrowing against its existing loan position at a lower cost of capital.

With an all-in cost of about 8.5% on the Whole Loan, and cheaper funding lined up for the back-leverage, CapitaLand’s return profile is expected to climb into double digits.

This approach echoes a precedent set last December by Angelo Gordon in Busan’s Haeundae residential development project. The US investment manager acquired a ₩110 billion senior loan at 8.7%, then refinanced ₩60.5 billion through Goldman Sachs at 6.2%. Angelo Gordon’s net equity outlay shrank to ₩49.5 billion, enabling it to push returns to 11.7% via leverage.

Traditionally in Korea, project loans are sliced across multiple lenders, allowing risk-sharing and tailored participation but at the cost of complexity, higher syndication fees, and conflicting interests. In workout scenarios, senior lenders can recover through collateral liquidation, often leaving mezzanine and junior lenders with heavy losses.

By contrast, a Whole Loan centralizes control under a single lender, eliminating cross-tranche conflicts. Yet, the model also concentrates risk: if the lender cannot successfully syndicate or faces liquidity strain, recovery becomes challenging. Local prudential regulations have also limited its adoption to date.

Still, with foreign institutional investors increasingly active in Korea, market watchers believe Whole Loan structures—already mainstream in the US and other mature markets—may gain traction as sponsors seek more efficient and flexible financing tools.