Samsung raises second US real estate debt fund for Korean investors

Samsung SRA Asset Management has closed its second US real estate debt fund, raising KRW360bn (€270m) from Korean investors.

It raised KRW50bn more than the first fund, launched in 2016, but like its predecessor will focus on the US office market, investing in B-notes and mezzanine debt.

Samsung SRA will target six gateway cities – New York, Boston, Washington DC, Chicago, San Francisco and Los Angeles – with loans with up to 65% loan-to-value ratios.

Young Chai, senior managing director and CIO at Samsung SRA Asset Management, told IPE Real Assets that all the investors in the first fund had joined the second fund.

“Some of them increased their allocation based on our track record of the first fund, which is the reason we were able to raise more capital this time,” he said.

“Korean institutions, particularly insurance companies, already have sizeable exposure to US commercial real estate debt. So they are comfortable to invest in this product.”

Asked about the likely impact of rising US interest rates, Chai said: “Most people expected US interest rates to rise eventually, but the rapid rate rise in January came as a big surprise to all of us.

“We are trying to assess how the commercial mortgage market is going to react. We won’t know the full impact until maybe towards the end of this month.”

He added: “We think there will continue to be favourable investment opportunities in the US.

“There are significant [volumes of] loans maturing this year, which need to be refinanced. The only difference is that interest rates are likely to be higher.”

Although the second debt fund provides similar guidelines on returns, Chai said that, if US Treasury rates continue to move up or remain at the current level, “we would certainly expect a commensurately higher coupon and, therefore, higher yield for our fund”.

While the first fund was fully invested within 11 months, Chai said: “We would have to see whether the second fund could keep up with that pace.”

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