Korean teachers’ fund co-invests $45 mn in senior loan for London office portfolio

The Korean Teachers’ Credit Union (KTCU) has invested 51.9 billion won ($45 million) in senior loans secured on a London office portfolio in co-investment with TH Real Estate, the South Korean retirement fund said on July 7.

The portfolio consists of seven small and medium-sized office buildings in the City, West End and South Bank in London, and aims to renovate them into co-working spaces which are in rising demand from start-up firms and small businesses.

TH Real Estate, an investment arm of the Teachers Insurance and Annuity Association of Americas, has raised 156.2 billion won for the portfolio investment through THRE UK Enhanced Debt Fund.

KTCU participated in the financing via a vehicle set up by South Korea’s EGIS Asset Management Co. Ltd.

It is targeting annual returns in the mid-5% range from the four-year project financing, according to a statement from the $25 billion savings fund. The senior loans were secured at 56% of the properties’ assessed value.

In aggregate, the office portfolio has secured 350 billion won in financing, including around 130 billion won from Brockton Capital LLP, online news provider edaily reported on July 6.

The office buildings are on 15-year lease contracts with co-working office providers, according to the KTCU.

Co-working spaces are gaining popularity across regions beyond the US and Europe. According to JLL, a real estate services firm, the number of co-working spaces is expected to surge to 13,800 by 2018 from 8,700 in 2015.

“Since the US rate hike last year, we have focused on mezzanine debts, while selectively chasing value-add investments,” edaily quoted an unnamed KTCU source as saying. “As shared offices are expected to become a mainstream supplier in the future office leasing market, they would generate stable returns.”

Earlier this year the Korean Teachers’ Credit Union (KTCU) 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.

By Daehun Kim

daepun@hankyung.com