TH Real Estate has been awarded a mandate to invest in the UK Commercial Real Estate (CRE) debt market by The Korean Teachers’ Credit Union, PERE's sister publication, Real Estate Capital, reported Monday.
The South Korea retirement fund – with assets of 27 trillion won (€20.5 billion; $24 billion) – is investing in senior loans secured on London office assets.
The new mandate has set TH Real Estate an annual returns target in the mid-5 percent range via senior loans issued at moderate LTV ratios over five-year terms.
The mandate will follow the strategy of the firm’s Global Real Estate Debt Partners – Fund I (UK), which has now attracted approximately £300 million (€334 million; $393 million).
For that fund, TH Real Estate invests in whole loans and selective junior-only loans of up to 75 percent loan-to-value, secured against well-positioned regional properties in the core-plus and value-add sectors of the UK market.
This latest debt instruction for TH Real Estate from a Korean investor follows mandates issued for real estate whole loan investments by Dongbu Insurance Company and Dongbu Life Company, one of Korea’s largest insurers.
“UK CRE debt is appealing to investors because it offers income-focused returns from a protected position in the capital structure. London offices in particular are underpinned by global structural trends and well positioned to deliver long-term value growth,” said Christian Janssen, head of debt at TH Real Estate.
In the first half of 2017, TH Real Estate, which is an affiliate of asset manager Nuveen, closed and committed 43 transactions for its global commercial debt portfolios, totalling $3.8 billion.
The firm has invested across the US and UK for the industrial, office, retail, and multi-family/student housing sectors. Key deals include a $200 million first mortgage financing for Lerner Enterprises on 1775 Tysons Boulevard, a 473,000 square foot property located in the Tysons Corner submarket of Washington, DC.
“Mortgages in both the US and UK continue to offer good relative value versus other fixed-income products and we are targeting an increase in loan origination across the risk spectrum,” said Jack Gay, TH Real Estate’s global head of debt. “For real estate investors, private debt is an increasingly inviting strategy given the current environment which is marked by low returns from fixed-income investments, high prices for equity investments that may appear risky and political uncertainty in many regions.”