NPS commits $1.5bn to sweeping SMA with Tishman Speyer

The Korean pension is giving the New York manager a mandate to invest in several strategies, including $500m for "market shifts and technology disruptions."

Rob Speyer
Speyer: major disruption is coming for the real estate industry

The National Pension System of Korea has committed $1.5 billion to a sweeping separately managed account with Tishman Speyer, PERE has learned.

The NPS-Tishman Speyer Thematic Platform gives Tishman Speyer nearly $1 billion of discretionary capital to invest in the US through four strategies: life sciences, workforce/affordable housing, credit and early-stage proptech.

The other $500-plus million has been set aside for investment in new initiatives around future innovations in real estate, which NPS will have to approve.

Tishman Speyer president and chief executive Rob Speyer said the platform both supports and validates his firm’s years-long effort to diversify beyond the traditional office sector. It is also the latest and largest in a series of partnerships with the 919 trillion won ($770 billion; €667 billion) pension that dates back more than a decade.

“We are constantly speaking with them, we have a very engaged dialogue,” Speyer said. “And that didn’t miss a beat during covid. We’re both always focused together on what’s next. So, this vehicle is all about what’s next, not just for NPS and Tishman Speyer, but for the real estate industry.”

Innovation on deck

Speyer said the capital reserved for new innovation will allow his firm to be “nimble and quick in responding to market shifts and technology disruptions,” which he expects to be plentiful in the real estate industry in the years ahead.

“The ability to be responsive to those shifts and disruptions is critical,” he said.

The reserve capital can be used to seed new funds and other platforms, Speyer said, though he provided few details about what those strategies might look like. He only noted that his firm had “a number of initiatives” in the works and it would be “introducing them over time.”

NPS, which has 54 trillion won of real estate AUM, did not respond to an email requesting further clarification about the commitment and enquiring whether it has similar arrangements with other managers.

Existing strategies

Two of the initiatives in the NPS-Tishman Speyer Thematic Platform build on existing strategies for Tishman, both of which have direct ties to the innovation economy.

The life science portion of the platform will flow through Breakthrough Properties, a joint venture between Tishman and Los Angeles-based biomedical investment group Bellco Capital. Breakthrough launched its debut commingled fund, Breakthrough Life Science Property Fund, last year with a target of $1 billion. The platform acquires and develops research laboratory and related office space.

Most of Tishman’s investment in the booming sector has been concentrated on Boston-Cambridge and San Diego, the two biggest hubs for the industry. But Speyer said it sees opportunity to expand elsewhere, too.

“Demand for life science space is incredible. It was strong before covid, it’s much stronger now,” he said. “It’s strong in the traditional clusters and there are also new clusters forming and opportunities to get on the front end of those new clusters.”

The other continuation strategy for Tishman is in proptech. It has made early-stage investments in about 20 proptech startups, primarily using its own balance sheet capital. One of its seed investments was Latch, a smart lock maker that Tishman helped take public through a special purpose acquisition company, or SPAC, merger earlier this year.

Speyer declined to provide a dollar-by-dollar breakdown of how NPS capital would be split between the designated strategies.

New initiatives

Tishman will use the other two discretionary strategies, affordable housing and mezzanine lending, to create formal platforms for activities it has traditionally pursued on a one-off basis.

While not a direct play on technology, Speyer said rapid increases in home prices in and around innovation hubs are driving out low- and middle-income workers at a rate that is “not sustainable.” To counter that, his firm has invested in both subsidized and market-rate workforce housing in and around San Francisco for the past decade. Through the NPS platform, he aims to take that initiative national.

“There’s a real opportunity here to do good and do well at the same time,” he said.

As for the credit side of the business, Tishman has dabbled in lending in the past, Speyer said, but now he sees a noticeable gap in the market that his firm can fill.

“If you have a straightforward, income-producing piece of real estate, there’s plenty of capital,” he said. “If you want to take risk to develop, or redevelop or re-lease, that capital is harder to come by. We take that risk in our equity business and we’re going to get comfortable taking that risk with our credit platform. And we are in a great position to prudently take that risk, because we know these markets, and we know these assets, and we’ve got the in-house expertise.”

Speyer declined to say how much NPS capital would go toward seeding these two new platforms or disclose any targets for the strategies.