The Korean Teachers’ Credit Union (KTCU) recently signed a memorandum of understanding (MOU) with the California State Teachers' Retirement System (CalSTRS).
Under the MOU signed August 30, the two parties will explore the opportunities and potential for further real estate investments together, investing in a broader range of assets and strengthen their business collaborations.
This follows the establishment of a joint venture (JV) earlier this year into US real estate investments. For KTCU, this JV has already shown the value of having overseas partners during a pandemic.
“Around the first half of 2021, the unexpectedly prolonged Covid-19 pandemic, with intensifying competitions and site-visit restrictions, was giving us enormous difficulties in obtaining superior investment opportunities," a KTCU spokesperson told AsianInvestor.
Site inspection and in-person due diligence are often considered pivotal for investing in private assets, or alternatives, when it comes to private equity — and especially real assets within real estate and infrastructure. And with a preference for having direct ownership, KTCU sought to find a way to not rely solely on blind pool, commingled investment funds by asset managers.
“Seeking co-investment opportunities with prominent global institutional investors to overcome these difficulties, we could develop a new partnership with CalSTRS,” the spokesperson said.
A GREAT START
KTCU and CalSTRS signed an agreement to launch their first real estate JV with approximately $510 million in capital in March of this year. The venture aims to invest in US-based logistics centres, KTCU said at the time.
KTCU believes the gains from this initial JV have proven themselves to such an extent that they are now exploring the opportunity to extend the partnership. The recent MOU was made even though the world is already far in the process of returning to some normality, allowing for more on-site inspections and in-person due diligence.
“The JV has become a great way for us to gain access to the US market with trusted local partners that have local knowledge and numerous sourcing channels. Although the JV was established lately, we believe that it will provide stable returns, based on the JV participants’ expertise in the US real estate market,” the KTCU spokesperson said.
A CalSTRS spokesperson declined to comment on the Californian pension fund’s motivations to exploring the collaboration with KTCU further beyond the established JV, as well as its gains from partnering with Korean peers and its potential plans to use the partnerships to invest in Korean or Asian assets. CalSTRS also has a similar JV with Korea’s Public Officials Benefit Association (Poba), which targets US multifamily residential real estate.
After that JV was announced in January 2020, Mike DiRe, director of real estate at Calstrs, explained that the pension fund has gradually rolled out a strategy across the portfolio that is designed to further increase the investments via separate accounts as well as club deals, JVs, and co-investments with other institutional investors, dubbed the Collaborative Model.
Using these investment strategies for decades, CalSTRS is increasingly favouring them, and partnerships play a key role.
“Forming joint ventures is aligned with the implementation of Calstrs’ Collaborative Model: an investment approach that enables CalSTRS to build direct investing capabilities while continuing to embrace external partnerships. Joint ventures give [us] access to a greater array of opportunities, high levels of control and attractive and aligned fee structures,” DiRe told AsianInvestor in February 2020.
In terms of Asian real estate investments, CalSTRS has from January to June agreed to invest $200 million in PAG Real Estate Partners (PREP) III, a pan-Asian core-plus/value-add real estate vehicle managed by Hong Kong-based PAG, with a strategy diversified across various real estate categories. It has also made a $125 million commitment to the Greystar Equity Partners Asia Pacific Fund I, which focuses on residential real estate, according to the CalSTRS investment committee's semi-annual activity report for first half of 2022.
CalSTRS also committed $500 million to Blackstone Real Estate Partners X, the tenth edition of the US private equity firm’s global opportunistic fund. The fund also invests within Asia and has a diversified strategy across various real estate categories.