PERE Seoul: How to bridge the cultural gap

Despite numerous differences between the two groups, Korean investors said both foreign managers and their own organizations would benefit from changing some of their current practices.

Hyungon Kim, senior manager at Korean Teachers’ Credit Union, has a simple request for overseas real estate managers.

“If you could call us by our name, that would make for a better meeting,” he said during the PERE Investor Forum: Seoul on Thursday, as interpreted by a translator. He said that about half of overseas managers will address Korean investors as “Mr. Kim” or “Mr. Lee” or “Mr. Park.” “But in Korea, there are so many Kims and Lees and Parks within the same organization.”

He also noted that foreign managers tended to follow up immediately after a meeting to gauge an investor’s interest in a potential investment. “For Korean investors, coming out and saying no is not easy,” Kim said. “Some foreign GPs ask right away, and we need a time buffer to say no.”

Meanwhile, Yong Won Shin, head of real estate investments at KB Insurance, pointed out that it was important for foreign managers to use data when presenting new strategies to Korean investors. “In Korea, multifamily is an unfamiliar concept. It’s still quite hard to understand, the concept itself is quite novel to us,” he said. “You need to show us what the numbers are like.”

At the same time, Kim has found working with overseas firms to be an eye-opening experience. “We see the GP members coming to Korea at all levels, he said. “In Korea, if you’re at the working level, you only talk to working-level people. if you’re an executive, you talk to executive-level people, you talk to the executives and the CEO. I get to meet with people at different levels, and get different insights. It’s one of the things I have enjoyed about working with foreign GPs.”

Shin added that with foreign firms, a person’s age did not have the same job implications as it would in Korea. “Agewise, my partners from overseas GPs are much younger than I am. They have higher positions than I have. In their sometimes short careers, they have high positions with high responsibilities. I also meet with people who are much older, who are at retirement age, but they are still active and passionate about what they are doing. In Korea, even if you’re young and capable, you still have to do low-level work. Then after retirement age, you have to retire. In other countries, age is not a factor if you are capable.”

Working with foreign firms has led KTCU to reevaluate some of its own processes. “I do believe there are some changes that we need to make,” said Kim. This includes the organization’s review process of investment opportunities. Some of the organization’s executives, for example, still question a foreign manager’s motives in presenting a potential transaction to the organization.

“They still ask, ‘why are they coming all the way to Korea with such an attractive deal?’” he said. “They tend to be suspicious about this. They need to be more open minded.”

Ultimately, however, the cultural gap between Korean investors and foreign managers is not as wide as some may believe. “We have staff that worked overseas,” said Kim. “We do have a lot of GPs coming from other countries, but they’re traveling a lot as well on business, so I think this level of understanding is deeper than you think. Foreign GPs are hiring a lot of Koreans, and they’re opening offices in Korea. They’ve done a lot to bridge the culture gap so far.”