The National Pension Service, a representative pension fund, is launching a large-scale domestic real estate investment project worth 1.35 trillion won.
According to the IB industry on the 13th Aug., the National Pension Service announced on the 9th the '2024 National Pension Fund Domestic Real Estate Investment Trust Management Company Selection Plan'.
It plans to invest up to 600 billion won in the Debt fund and up to 750 billion won in the Core-Platform fund.
No more than two companies will be selected for the Debt Fund, and each fund will have a minimum of 400 billion won and a maximum of 600 billion won.
The main investment targets of the loan fund are domestic commercial real estate loans (Debt) and post-construction mortgage loans of 70% or more.
The borrowing limit is within 75% of LTV (loan-to-value) per case and 70% of total LTV. However, the LTV for preferred shares is 85%. The LTC (loan to cost ratio) for PF (Project Financing) is within 75%.
Preferred stock investments can be made to secure loan investments or to improve returns. However, preferred stock investment is not allowed in funds set up by the management company.
Loan to value after completion is 70% or more. However, the total limit of investment in middle or preferred stocks is 30%.
PF (authorized PF, no bridge loans) can only make senior loans.
The target return for the Loan Fund is 6.1% net internal rate of return (IRR) after all fees and expenses.
Core Platform Funds will be selected within three companies, with a minimum of KRW 340 billion and a maximum of KRW 500 billion for each fund.
The Core Platform Fund will invest at least 30% in new economy assets such as domestic IDCs, urban logistics, self-storage, and life sciences that can implement the Core investment strategy. And 70% or less in other assets such as office and retail.
Borrowing is limited to 65% LTV per deal and 60% LTV overall. The Core Platform Fund has a minimum target return of 8.3% Net IRR, net of fees.
Neither fund will invest in residential real estate. The fund has a maturity of 10 years or less with a 2-year extension.
The National Pension Service plans to select and announce the management companies of the loan fund in this November and that of the core platform fund next January 2025.
Jeong Suneun (bravebambi@fntimes.com)
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