Samsung SRA Asset Management, the property investment arm of the Samsung Group, is planning to raise a $300 billion won (€242 million; $270 million) real estate mezzanine fund, local press reported last week.
The fund will invest in mezzanine or subordinated loans in commercial buildings in major US cities.
According to market sources, the fund will mainly raise capital from its affiliates, including Samsung Life and Samsung Fire & Marine. It is also targeting insurance firms facing strict capital requirements.
Samsung has not yet responded to requests for comment.
In Asia, yield compression has made it a challenging time for insurance companies, most of which do not use leverage, to find the right core deals at the right price in the market, Hidetoshi Ono, managing director of Japan Real Estate for Manulife Insurance, told PDI’s sister publication PERE.
“They would invest in a strategy that can return capital faster. By virtue of doing that, if you take mezzanine, it produces relatively high IRRs with low multiples, so it can be a nice balance to a portfolio,” Javad Mosoumov, managing director at UBS Private Funds Group, told PDI.
“Overall I would say Korean investors are quite focused on yield, so for them, credit investments are much easier to understand and they like them more than traditional private equity funds. This is because for private equity, you probably don’t see a return after five or six years of your initial investment. But for debt, you invest and you start seeing some return back in cash in a year. ”
Indeed, a lot of Korean pension funds have been actively looking for real estate debt investments outside Asia. Most recently, Korea Post Savings, the government-backed savings arm of the national post, is planning to commit $450 million to three global real estate fund managers playing in the US commercial first mortgage loan market.