TH Real Estate and KTCU form $1bn debt JV

This is the third partnership between the Korean institutional investor and the global investment management giant to invest in real estate debt opportunities in the US.

Global real estate investment management TH Real Estate has formed a $1 billion joint venture partnership with The Korean Teachers’ Credit Union (KTCU) to invest in commercial real estate loans in the US, PDI’s sister publication PERE reports.

In an exclusive interview with PERE, Jack Gay, TH Real Estate’s global head of debt, said the capital will be deployed in modest-leverage mezzanine and subordinate debt investments, as well as lower-rated single asset commercial mortgage-backed securities.

TH Real Estate owns a 51 percent stake in the JV, with its share of capital being invested on behalf of the TIAA General Account. KTCU owns the remaining share.

TH Real Estate did not disclose the specific return target for the JV but said that it would be in single digits.

This is the third partnership between the two firms for US debt investments. In 2014, KTCU led a club of Korean investors to co-invest along with TH Real Estate a total of $455 million in commercial mortgages backed by three office buildings. Later that same year, KTCU and TH Real Estate established a joint venture partnership to seek up to $1 billion in additional assets. Investments included mezzanine loans on two Class A office properties.

On the continuing appeal of US real estate debt for foreign investors, Gay said: “The low interest rate environment has investors looking for yield and for defensive investments at this mature stage in the real estate cycle. We continue to see strong demand from foreign capital looking for opportunities in the US which appear to be especially attractive on relative basis, given global trends.”

KTCU has been expanding its exposure to the US property market in recent years. According to PERE data, KTCU plans to invest in five new real estate funds in the US this year. In terms of investment strategy, the credit union is targeting value-add and opportunistic deals in addition to making direct mezzanine debt investments. Currently, the investor has commitments to 18 real estate funds, totaling $1.2 billion.

Meanwhile TH Real Estate closed 62 commercial loan deals in the US and UK last year, with an aggregate value of more than $4.4 billion, according to a company statement. Overall, the firm has $96 billion in assets under management globally via a combination of debt and equity funds and mandates.