KTCU invests $71 mn in TH Real Estate-led purchase of China outlet malls

  • 2018-03-25

The Korean Teachers’ Credit Union (KTCU) has invested 77 billion won ($71 million) in a fund of TH Real Estate which acquired two premier outlet malls in China for $750 million last year on the upbeat outlook for China’s growing luxury goods market.

China Outlet Mall Fund (COMF), managed by TH Real Estate, bought two Florentia Village outlet malls in Shanghai and Jingjin, after reportedly raising $750 million in equity commitments.

KTCU participated in the COMF as an equity investor, according to investment banking sources on March 23.

Allianz Real Estate is the anchor investor owning 30% of the fund and Hong Kong-based real estate investment firm Gaw Capital acted as co-capital sponsor, TH Real Estate said in a statement on Nov. 21, 2017.

Other investors include TIAA General Account and a Frankfurt-based asset management company.

COMF targets designer outlet malls in China which are expected to generate annual returns above 15% over a holding period of 10 years.

Its target portfolio size is $2 billion with the maximum gearing ratio of 50%.

China’s luxury outlet sector looks ripe for strong growth with the expansion of China’s middle class and their spending power.

“The Chinese make up 29% of global luxury spending, 77% of which however is spent outside the country. Luxury shopping mall supply remains at absolutely low levels in China,” a KTCU source told the Korean Investors.

China’s retail market is expected to grow at an annual rate of 9.2% through 2025 on average, outstripping the projected expansion of 3.4% and 2.8% in the US and Europe each, according to the KTCU source.

The investment comes after KTCU reaped a hefty return from a senior loan of 110 billion won it had lent to a shopping mall construction project in Vietnam led by private equity firm Warburg Pincus in 2015. The investment fund was reportedly liquidated in 2017 ahead of maturity, delivering an 8%-range return per annum to debt investors.

KTCU, a $23 billion savings fund, has been teaming up with TH Real Estate and Gaw Capital for real estate investments in the US and Europe.

In 2018 KTCU plans to invest an additional 1.1 trillion in alternative assets, out of the 1.6 trillion won it earmarked for this year’s new global investments.

TH Real Estate is an affiliate of the Teachers Insurance and Annuity Association of Americas’ (TIAA) investment management arm Nuveen.

By Daehun Kim

daepun@hankyung.com

<Edited by Yeonhee Kim>