Korea Post awards $436 mn real estate debt mandates to three US firms

The asset management units of the Teachers Insurance and Annuity Association of America (TIAA), Prudential Financial Inc., and New York Life Insurance Co. have secured mandates from Korea Post’s savings arm to invest a combined 500 billion won ($436 million) in senior debts backed by commercial real estate in North America.

 

Korea Post’s Savings Bureau will commit about 150 billion to 200 billion won each to new funds to be created for the debt investment. The three US asset managers will also inject their capital as much as Korea Post into the funds, according to investment banking sources on March 15.

They will chase senior debts secured by commercial real estate in major cities in North America, targeting an annual return of 4 to 5%. Their target assets will be limited to the property with a loan-to-value ratio of 65% or below, with high-risk real estate assets such as development projects to be excluded.

The funds will invest at least $20 million per case for a time horizon of less than 10 years.

Korea Post selected the three US companies last December. They are now in discussion on details over the fund management.

Korea Post’s Savings Bureau has been shifting overseas investment focus to fixed-income assets since last year to brace for growing market volatility, its savings unit head told a local newspaper earlier this year.

With $53 billion in assets under management, the postal service’s savings unit invested $300 million in private debt funds in 2016.

It also plans to allocate about 100 billion won to offshore insurance-linked securities to diversify overseas investment portfolios.

By Donghun Lee
Leedh@hankyung.com