KIC, Teachers’ Pension to invest in US warehouse fund, first since joint work agreement

  • 2016-11-09

Korea Investment Corporation (KIC) and the Teachers’ Pension will invest in a U.S. warehouse portfolio fund for an undisclosed sum, in their first joint investment since the two South Korean funds reached a tentative agreement last year to seek overseas deals together.

The pension fund for South Korea’s private school personnel said on Nov. 8 that it and the KIC will put money in the warehouse fund which has 32 warehouse properties in key distribution centers in central, eastern and western parts of the United States, managed by a U.S. real estate investment firm.

KIC and the pension scheme declined to give details on the amount of their investment and the warehouse fund’s operator, citing confidentiality agreements with the fund management firm.

The warehouse fund targets an annual return of about 6%, according to Yonhap Infomax, a domestic news outlet.

South Korea’s pension and savings funds, small relative to global counterparts in asset size, has wanted the sovereign wealth fund, KIC, to help source foreign deals by utilizing its global networks. KIC and the Teachers’ Pension signed a memorandum of understanding in October last year to work jointly to secure offshore assets.

As South Korean pension and savings funds are boosting allocations to offshore assets, the finance ministry said in a statement in late July that the country’s public pension funds, including the Teachers’ Pension and the National Pension Service, will make a close cooperation in sharing information and exploring joint investment opportunities overseas.

“We will invest in a wide array of overseas assets by continuously engaging with the KIC,” Yonhap Infomax cited a source of the Teachers’ Pension.

The latest investment decision underscores optimism about the U.S. warehouse property industry.

Supply of warehouse space has dwindled sharply in the world’s largest market, compared to the average of the past 25 years. The vacancy rate tumbled to a historic low of around 7% last year.

“We see a steady growth in U.S. online commerce,” a source of the Teachers’ Pension told the Korea Economic Daily. “There is room for rents of logistic warehouses to go up further.”

Tenants of the warehouse properties in the portfolio include Amazon.com Inc., Starbucks Corp., Walmart Stores Inc. and other high credit-rating companies in long-term lease contracts. It was known that other sovereign wealth funds also took part in the fund.

Earlier this year, South Korea’s Meritz Securities Co. Ltd. acquired a logistics center of Amazon.com in San Antonio, Texas for around 120 billion won ($106 million), together with domestic asset management houses.

By Daehun Kim and Donghun Lee

daepun@hankyung.com

<Edited by Yeonhee Kim>