Even fully leased office assets have not been spared from Europe’s repricing cycle. IGIS Asset Management, Korea’s largest real estate investment firm with USD 48.5 billion in AUM as of early 2025, is liquidating a public fund backed by Nestlé’s Spanish headquarters at an estimated loss of nearly 80%.

The property, located in Barcelona and leased entirely to Nestlé under a long-term agreement through 2028, was sold for EUR 63 million—34% below its 2018 purchase price of EUR 95.6 million. The fund had been approaching its scheduled maturity in September 2025.

The investment was made through “IGIS Global Real Estate Investment Trust 204,” a public fund launched in 2018 to acquire the property for EUR 90 million (EUR 95.6 million including fees), or approximately KRW 129.1 billion (USD 94.2 million, USD 3,050/m²).

The vehicle raised KRW 55.6 billion (USD 40.6 million) through domestic public subscription—slightly short of the KRW 57.9 billion target.

A senior loan of EUR 52.7 million was secured at an LTV of 55%. Although the asset presented no vacancy risk, the sharp rise in European base rates to 4.5% post-COVID significantly eroded its valuation, particularly due to the leverage level.

IGIS disclosed the sale on May 27 to a Spanish buyer at EUR 63 million. From this, EUR 50.26 million will be used to retire the senior loan. The remaining EUR 2.74 million (KRW 4.3 billion, USD 3.2 million) is to be distributed to investors, though net proceeds will fall slightly after transaction taxes and expenses.

As of May 28, the fund’s net asset value per unit stood at KRW 240—translating to a 76% capital loss. Factoring in final liquidation costs, the total investor loss rate is projected to approach 80%.

Despite its seven-year legal maturity, the fund originally aimed for a three-year exit according to its prospectus, signaling a short-term capital gain strategy. However, the European office market has yet to recover from the post-pandemic slump, and with the fund nearing its maturity, IGIS likely faced pressure to dispose of the asset under distressed terms.

A foreign asset manager noted, “With the office market still soft and limited demand for single-tenant assets, it’s tough to justify pricing close to pre-rate-hike levels.” They added, “Since the vehicle was publicly offered, backlash from retail investors facing steep losses is inevitable.”

This article was published in Corebeat on May 30, 2025.