LaSalle seeks $180 mn-$270 mn from Korea for Europe debt fund

Jun 06, 2017 (Gmt+09:00)

2 Min read

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LaSalle Investment Management is seeking to raise 200 billion won ($180 million) to 300 billion won ($270 million) from South Korean institutional investors for its latest UK-focused real estate debt fund which it expects to attract over 1 trillion won ($894 million) in aggregate.

The US property investment firm is in talks with around 10 South Korean asset owners to collect investment for its most recently launched debt fund series, LaSalle Real Estate Debt Strategies III.

The fund targets mezzanine debts secured against real estate for an annual return of 9 to 11%, the Maeil Business Newspaper reported.

It will undertake two-round fundraisers in South Korea to raise the target amount from June through October.

A source of LaSalle Investment confirmed the report on June 5.

As of late May, LaSalle Real Estate Debt Strategies III has secured aggregate commitments of 334 million pounds ($431 million) and is well on track to exceed the 600 million pounds ($775 million) raised for the prior fund, according to its statement released on May 25.

South Korean asset owners, in particular insurers, are increasingly shifting towards debt investment than equities in an effort to cut risk-based capital ratios.

In a poll of South Korea’s 20 large institutional investors by the Korean Investors last month, 17 respondents said they will scale up private debt investment, while three others saw no change to their private debt portfolios this year.

With property prices on the rise across advanced countries, Europe’s commercial property loan market is estimated to exceed $2 trillion, similar to the US.

But unlike the US, a lack of alternative lending sources in Europe will provide more opportunities and hefty returns for private debt investors as traditional banks are curtailing mortgage lending, according to JB Park, who leads LaSalle Investment’s client capital group in Korea, in recent interviews with local newspapers.

Meanwhile, Korea Teachers’ Pension has committed $50 million to LaSalle Income & Growth Fund VII. The latest US value-add real estate fund of LaSalle is expected to deliver an annual return of about 14 to 16%, Teachers Pension said in a statement last December.

By Chang Jae Yoo

yoocool@hankyung.com