TIAA-CREF, Korean teachers’ savings fund to form $1 bn US real estate debt JV

The Korean Teachers’ Credit Union (KTCU) will set up a $1 billion joint venture with the Teachers Insurance and Annuity Association of America - College Retirement Equities Fund (TIAA-CREF) to invest in US commercial real estate debt, just after their prior joint entity for property investment terminated at the end of last year.

KTCU, a $25 billion retirement fund for South Korean teachers, is also seeking to expand its business partnership with the US counterpart into a wider range of alternative investments, including social overhead capital projects and private equity funds, according to the KTCU. Both funds had inked a preliminary agreement last September on the joint venture establishment.

The 51:49 real estate joint venture will be set up by the end of this month and will be operational for four years after inception, a KTCU source said on Jan. 24.

It will be 51% owned by TH Real Estate, TIAA-CREF’s real estate investment arm, with KTCU controlling the remaining 49%. They will commit capital to the venture on capital calls, with which TH Real Estate will launch a blind fund for investment on behalf of TIAA-CREF and KTCU.

The two teachers’ funds started co-investment in the US property market after signing a preliminary agreement in 2012. They had invested in a secured debt fund backed by three US prime office buildings - Seagram building and 650 Madison Avenue building in New York, and Post Oak Central building in Houston.

After entering a definitive agreement for business cooperation in November 2014, they set up a 51:49 joint venture and made co-investment of $501 million in four real estate cases, according to the KTCU’s press release on its website.

KTCU expects the new joint venture will help lower investment risks through co-investment, and speed up US real estate investment by simplifying the decision-making process.

“Local pension funds need to conduct due diligence and review for every investment case, and go through multiple-step decision-making process,” said a Korean savings fund source. “Given that the key to overseas alternative investment is a quick decision-making to reach a final investment, the process will be significantly simplified in that structure,” he added, referring to the joint venture between the TIAA-CREF and the KTCU.

TIAA manages $889 billion of assets for about 4.8 million American teachers and educators.

By Daehun Kim

daepun@hankyung.com