Korea's NPS awards three mandates for investment in real estate

Korea’s National Pension Service (NPS) has awarded three mandates totalling KRW600bn (€474m) for investment in real estate in a drive to lift its exposure to alternative assets.

The mandates have gone to three Korean managers - IGIS Asset Management; Mastern Investment Management; and ADF Asset Management.

Each manager receives KRW200bn to implement the NPS value-add and core logistics strategy.

IGIS declined to comment on the mandate.

Industry sources confirmed the award of the NPS mandates.

A source close to IGIS told IPE Real Assets the NPS mandate will form the cornerstone of a proposed new IGIS fund.

The manager is sounding out interested institutions to co-invest with NPS in the fund.

While details are still being worked out, it is likely that other IGIS investors will match the commitment from NPS.

The latest mandate came after IGIS fully deployed another value-add mandate from NPS earlier this month.

With NPS setting a precedent to invest in funds, it is now expected that other Korean institutions to take a similar route, moving away from deal-by-deal or the club approach.

As with its earlier mandate, IGIS would bring in core investors. In the previous fund, IGIS partnered with Korea’s Ministry of Employment and Labor Reserve Fund.

With gearing, the source said the proposed vehicle could have a purchasing power of up to US$1bn (€847.4m).

Sources said IGIS is expected to invest the capital in diversified sectors, focussing on opportunities to add value to buildings and repositioning them as core assets.

IGIS has established a reputation as a value-add investor. As an example, the firm which operates a fully-integrated asset management business from project management through to leasing turned an under-managed asset into a core asset.

IGIS acquired the building in the IFC complex in Yeouido, Seoul’s financial centre, from the Samsung Life at around  15% discount.

“IGIS extended the food and beverage retail areas by converting the lower three floors,” a source told IPE Real Assets.

By doing so, IGIS returned to its investors a gross return of 30% on an initial investment.

Industry sources said with core assets difficult to come by and expensive when they do come to market, value-add has become the most compelling investment strategy for institutional investors.

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