Korea Post is targeting to expand its US property exposure in the mezzanine debt financing and the commercial mortgage backed securities (CMBS) market next year as a substitute to low-yielding bonds.
In an on-stage interview at the PERE Global Investor Forum in Seoul, Hee-Joong Kim, deputy director of the alternative investment division in the Savings Bureau of Korea Post, said the state-owned group is currently in the infant stage of real estate investment but is looking to gradually increase its alternative investments portfolio.
“Our fundamental strategy is focusing on dividend gains rather than capital gains. Given there is a bubble possibility in the US, and the loan markets are well advanced, we will increase focus on mezzanine investments,” he said, as interpreted by a translator.
In Europe meanwhile, Korea Post is planning to purse equity investments in logistics and office sectors.
“Korea Post has total real estate assets of 2.3 trillion won ($1.96 billion; 1.84 billion), which is only around 2 percent [of the total portfolio]. So rather than focus on portfolio reconstruction we are targeting to try out different strategies. When we reach a certain level, say a 3 percent real estate allocation, we can work on building a more optimal portfolio,” said Hee-Joong.
Several Korean institutional investors, including the Public Officials Benefit Association (POBA) and Teachers Pension, have indicated a growing interest in investing in higher risk strategies in overseas markets.
Hee-Joong said the national postal giant however will not be investing in opportunistic or development projects.
“Our basic stance is not to do risky investments. We have the following major criteria for buying any asset: tenant should have a double-A rating, the vacancy rate should be maximum 10 percent, the property should have a stable cash flow, and it should be located in a gateway city or a downtown area.”
Korea Post has 48 trillion won in total assets under management. The savings division has a real estate AUM of 1 trillion won while that of that insurance division is 1.3 trillion won.