This year’s PERE Investor Forum: Seoul focused on the rise of outbound Korean real estate investment. That was of little wonder as Korean real estate investment volume overseas has exceeded domestic investment volume since last year, according to the Korean Financial Investment Association. As multiple Korean institutional investors discussed their current plans and future activities in overseas real estate, several common themes emerged:
- Unfazed by North Korea – Although the first day of PERE Seoul coincided with North Korea launching its highest-ever ballistic missile, Korean institutional investors did not appear to be fazed, at least onstage, about the threat of its neighbor to the north. Asked whether the ongoing political climate has made them reconsider their local investments and invest more money in offshore property markets instead, three Korean institutional investors said no.
- Moving up the risk spectrum – Korean investors such as Korea Post and the Public Officials Benefits Association focused on core investments when they began investing in overseas real estate. However, both organizations said they plan to shift more capital into value-add and opportunistic strategies going forward. For Se Hyeong Seong, deputy director at Korea Post, value-add opportunities can offer more upside.
- All about overseas debt funds – Over the past couple of years, Korean investors have been making a big push into real estate debt. Of the $6.5 billion they deployed in overseas real estate funds in 2016, 80 percent was in debt funds, according to the Military Mutual Aid Association, which presented a real estate debt case study at the conference. By contrast, debt funds accounted for just 30 percent of the overseas real estate fund volume in 2015. Se at Korea Post said onstage that he considered debt investments to offer good downside protection in the face of rising real estate prices and interest rates.
- Betting on the housing – Many Korean investors are diversifying significantly by property type as well, and are bullish on housing, including student, senior housing and manufactured housing. Korea Investment Corporation said that during such a late period in the real estate cycle, KIC has become more selective about its overseas investments and is exploring investments that can take advantage of demographic and urbanization trends. As an example, Namkeun Lim, director of the real estate and infrastructure team at KIC, said the state fund is looking at the diversified housing sector in the US. Meanwhile, another investor that has already made a significant bet in the US residential sector said rental housing is the sector his organization is most focused on in the mid to long term, given demographic trends.inves
- Home advantage – Even when investing abroad, Korean investors prefer to invest with compatriot managers investing outside of Korea rather foreign managers based in those markets. Sung Seog Kang, chief investment officer at Korea Teachers’ Credit Union, in fact went on to say there are not too many Korean managers operating in overseas markets. “They should go out and globalize, and acquire foreign managers. I don’t know why they don’t do it,” he commented during an onstage interview.