[ASK 2017 SUMMIT Panel Talks] Debt, Europe remain at top of Korean LPs’ property deals

Top South Korean institutional investors will remain focused on property-backed debt and Europe for real estate investment in 2018 because of valuation concerns, while expanding into second-tier cities and value-add and opportunistic strategies, said their senior managers.

The following are remarks from key managers of four Korean institutional investors in a panel discussion during the ASK Real Estate & Infrastructure Summit in Seoul on Oct. 25.

▶Teachers’ Pension with $14 billion AUM (Youngsin Jeong, global alternative investment team head):

“Pricing has become the key consideration for our real estate investment. Overseas, we invest primarily in commercial business districts in first and second-tier cities with focus on stability rather than profitability.

 “We have invested in North America, Germany and France, and our portfolio would remain focused on developed markets.

“For infrastructure, we may adopt secondary strategy for some portion. We now look at portfolio deals rather than single asset deals.”

▶Public Officials Benefit Association with $9 billion AUM (YoungSoo Kim, team head):

“We are now looking at value-add and opportunistic investments beyond core assets.”

“We take a different approach by region and country. In the region where prices are high, we concentrate on lending and mezzanine (debt). We focus on Europe and recently invested in major cities in Germany, Belgium and France. We look at the outlook of industries where we are investing and general managers’ capability, after location.”

▶Military Mutual Aid Association with $9 billion AUM (Jin Woo Kim, managing director):

“We have invested primarily in (real estate) debt since last year. We are looking closely at Germany because of their solid economy and we can also use leverage.”

▶Kyobo Life Insurance (Bo Seok Kim, general manager):

“Because of price, our global real estate investment has been focused on debt financing, particularly mezzanine and B-notes, since 2015. By asset type, we are heavily weighted to core assets.”

“We will continue stable asset management. (Investment in) debt financing will likely continue in 2018. There will be more interest in Australia and Europe because they lag behind the US in price rises.”

“We prefer large-size deals to small-size ones and focus on class A assets. Because higher prices, we look at rent increase and whether vacancy rates are improving.”

By Daehun Kim

daepun@hankyung.com