A Kiwoom Investment Asset Management fund investing in Amsterdam office properties saw its net asset value plunge 25-26% on May 20 following a real estate revaluation. The asset value of The Queens Towers declined to €79 million as of June 2026, representing a 39% decrease from the original purchase price of €129.73 million. The fund has been in default on derivative settlement payments exceeding ₩3.57 billion since February 26, 2025, and now faces additional default risk as its loan-to-value ratio approaches 90%, breaching the 75% covenant threshold after a grace period ended this year.
Asset Revaluation Triggers 26% NAV Decline
The Kiwoom Heroes Europe Office Real Estate Investment Trust fund was established in August 2019 with ₩68 billion in assets. A local real estate advisory firm valued The Queens Towers at €79 million as of June 2026, down 39% from the €129.73 million purchase price. This revaluation caused the fund's NAV to drop 25-26% in a single day on May 20.
The fund originally promoted annual rental returns of 6-7% based on 99.7-100% occupancy and approximately 79% of tenants being UWV, a public institution under the Netherlands Ministry of Social Affairs. The initial trust period of 5 years and 6 months was extended to 10 years and 6 months following a unitholders' meeting in August 2024.
LTV Breach Adds Default Risk After Grace Period Ends
The fund's total loan amount is €70.805 million at a fixed 5.52% annual interest rate, with quarterly installment payments of €177,500 and remaining balance due at maturity on September 4, 2026. The loan agreement stipulates that exceeding a 75% LTV triggers an event of default.
An LTV waiver clause exempted the fund from this requirement until January 1, 2026. As of July 2024, the LTV stood at 83.1% based on appraised value. With the current asset value decline, the estimated LTV approaches 90%. The grace period has expired, and the LTV covenant breach creates default risk.
Derivative Settlement Default Continues Since February 2025
The fund entered default status on derivative settlement obligations. A violation of derivatives trading risk assessment limits under capital markets law occurred due to asset value decline. The fund executed offsetting transactions, resulting in a settlement payment obligation of approximately ₩3.57 billion as of February 26, 2025.
Cash trap provisions froze operating income in senior lender management accounts, eliminating available cash for settlement payments. The settlement payment remains unpaid, with 9% annual late payment interest accumulating as debt. A Kiwoom Investment Asset Management representative confirmed the settlement payment remains unpaid.
Asset Sale Attempts Stalled by Low Valuations
Kiwoom Investment Asset Management pursued asset sales in late 2023. Two institutions offered €50-60 million, less than half the purchase price. The company suspended the sale process, stating that "selling at this time would result in total investment loss considering remaining loan balance."
In January, the fund extended the lease agreement with primary tenant UWV for 10 years until 2035. Senior lenders are using this development to pressure for asset sales more aggressively. Lenders mentioned "secondary sale" of loan claims to third parties and maintain a firm position. With loan maturity approximately two months away, a Kiwoom representative stated negotiations with lenders are ongoing for a 2-year extension.
Cash Trap Provisions Block Investor Distributions
The fund's currency hedge ratio changed from 100% principal and 50%+ profit distributions to 0%, effectively unhedged. Distributions scheduled every 6 months have been frozen due to cash trap activation. A Kiwoom representative stated the company responds to investor inquiries through sales agents and announces changes or important matters through disclosures.
According to the Financial Supervisory Service, overseas real estate alternative investments with event of default situations totaled ₩2.08 trillion as of December last year. This figure decreased for three consecutive quarters before rising again in the fourth quarter of last year.
FAQ
What caused the Kiwoom Amsterdam office fund NAV to drop 26% on May 20?
The fund's NAV declined 25-26% in one day following a real estate revaluation that reduced The Queens Towers' value to €79 million as of June 2026, down 39% from the €129.73 million purchase price.
Why is the fund unable to pay the derivative settlement amount since February 2025?
Cash trap provisions froze operating income in senior lender management accounts after LTV covenant issues, eliminating available cash to pay the approximately ₩3.57 billion settlement obligation that became due on February 26, 2025. The unpaid amount accrues 9% annual late payment interest.
