CalSTRS, POBA launch $600 mn US property loan JV

The California State Teachers’ Retirement System (CalSTRS) and South Korea's Public Officials Benefit Association (POBA) have launched a $600 million joint venture to invest in US commercial real estate loans, which marks their fourth co-investment fund since 2018.

Earlier this year, CalSTRS and POBA contributed $300 million each to the JV to invest in senior loans against US commercial real estate, targeting an 8% internal rate of return, according to POBA and investment banking sources on Apr. 27.

"Since the COVID-19 pandemic began, banks have adopted a cautious approach to loans against commercial property, creating a niche market for institutional investors," a POBA source told Market Insight, the capital news outlet of The Korea Economic Daily.

"This new joint venture will focus on loans against major office buildings that need to be refinanced," he said.

The latest JV will bring their co-investments to $1.7 billion in total.

Between 2018 and 2019, CalSTRS and POBA together launched two $400 million JVs to invest in senior loans against US office and commercial buildings, targeting an IRR in the 7% range.

Last year, they set up a $312.5 million JV to invest in equities in US multifamily properties for an expected IRR of about 7%.

PCCP LLC, a Los Angeles-based real estate investment manager, will run the $600 million debt fund. In Korea, Koramco Asset Management Co. will be in charge of a domestic vehicle set up for the JV. Both PCCP and Koramco also managed the two $400 million JVs of CalSTRS and POBA in the US and Korea, respectively.

POBA manages 15.6 trillion won ($14 billion) in assets for South Korea's provincial government employees for an annual target return of 4.1%, with alternative assets making up almost 60%. CalSTRS is the second-largest US public pension fund with assets of $292 billion as of March 31, 2021.
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Write to Jung-hwan Hwang at jung@hankyung.com
Yeonhee Kim edited this article.