KTB Asset Management Co. Ltd. has raised 120 billion won ($106 million) from three South Korean financial services firms for a blind-pool fund to invest in senior debt collateralized by office buildings in US gateway cities.
It is the first blind-pool fund launched by a South Korean asset manager focusing on real estate senior debt, underscoring rising demand for global real estate debt from domestic asset owners in search of steady returns with low risk.
The fund will invest in senior secured debt to be arranged by KeyBank, a US real estate loan provider, targeting an annual return of between 4.5% and 5% with an investment period of 12 years and five months.
Its three limited partners include an insurance company, but they cannot be identified immediately.
KTB Asset, with 10 trillion won in AUM, plans to launch other types of blind-pool funds targeting mezzanine debt secured on US real estate, as it has been pushing for overseas real estate investments with new hires of real estate experts since last year.
A KTB source said that blind-pool funds would have advantages over project funds. Project funds begin fundraising after a target asset is determined, and thus uncertainty exists about whether their fundraising goals can be reached.
“Because of the uncertainty, they tend to have a weak bargaining power and the selling side shows little preference for them,” said the source on Sept. 6. “Investing with a blind-pool fund will alleviate such concerns and we will get a competitive advantage in financing.”
Blind-pool funds also go through more simplified procedures than project funds for fundraising, which helps speed up decision-making.
In June, Samsung SRA Asset Management Co. Ltd. launched a 500 billion won blind-pool fund to invest in office buildings in major cities across the US and Europe, following similar fund launches in 2015 and 2016.
In 2015 Mirae Asset Global Investments Co. Ltd. raised 450 billion won for a blind-pool real estate fund from its brokerage sister company, South Korean pension funds and insurers. The fund achieved an annual return of the 9% range after acquiring the Cologne City Hall building in Germany and providing mezzanine loans secured on logistics centers of FedEx.
By Taeho Lee and Daehun Kim
<Edited by Yeonhee Kim>
Photograph: Getty Images Bank