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Real estate

KTCU to join in $700 mn US value-add residential project: report 

Sep 03, 2020 (Gmt+09:00)

The Korean Teachers’ Credit Union (KTCU) will invest $50 million in a $700 million value-add residential project under which a group of investors will finance the acquisition and renovation of a multi-family complex near Washington D.C., according to media reports.

The project is set to generate a 13% annual internal rate of return during the six-year investment period, the Maeil Business Newspaper reported on Sept. 2.

Los Angeles-based CIM Group led the purchase of Southern Towers in Alexandria, Virginia, a suburb of Washington, for $506 million. The remaining investment will go to renovation.

The complex is comprised of five 16-story apartment buildings with 2,346 units. The buildings were constructed between 1961 and 1965, with one building renovated in 2015, according to CIM’s Sept. 1 press release.

The transaction is one of the biggest US multi-family complex deals so far this year, valued at near pre-pandemic prices.

Funding for the $700 million project breaks down to $250 million in subordinated notes from KTCU and US institutional investors; and $450 million in loans from US banks.

KTCU, the sole Korean investor in the project, will make the investment through a vehicle to be created by Seoul-based Vestas Investment Management Co. Ltd.

The multi-family complex is a 10-minute drive from Facebook Inc.’s second headquarters to be built in Washington DC by 2023.

Given its proximity to Pentagon City, Arlington, Fairfax and Washington D.C., the residential property is expected to see steady rent demand.

Compared to office buildings, the multi-family rental market has a shorter lease term of one to two years and thus reflects consumer price inflation in rents.

In the first half of this year, KTCU reported a 9.7% return from overseas real asset investments, including real estate and infrastructure facilities, above the 6.2% gain it posted for the same period last year. Overall, KTCU posted an average investment return of 5.4% in the first half of this year, slightly below the 6.3% a year earlier.

Overseas real assets accounted for 40.4% of its alternative portfolio as of the end of June.

Vestas Investment is currently raising a blind-pool fund to invest in logistics facilities in Europe, the Maeil Business Newspaper added.

Yeonhee Kim edited this article

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