[Alpha Biz= Reporter Kim Minyoung] National Pension Service to Invest 1.35 Trillion Won in Domestic Real Estate

On September 9, the National Pension Service (NPS) announced plans to invest 1.35 trillion won in domestic real estate through two types of funds: a lending fund and a core platform fund.

The NPS will allocate up to 600 billion won to the lending fund and up to 750 billion won to the core platform fund.

The lending fund will be invested in up to two companies, with each fund's total capital ranging between 400 billion won and 600 billion won. This fund will target investments in commercial real estate loans and post-construction collateral loans, with 70% of assets secured. The fund will have a term of up to 10 years, with a possible extension of up to 2 years. The borrowing limits are set at 75% LTV (loan-to-value ratio) per individual loan and 70% overall. Preferred shares are capped at 85% LTV and project financing (PF) loans are limited to 75% loan-to-cost (LTC) ratio. The target net internal rate of return (IRR), after fees, is 6.1%.

The core platform fund will be invested in up to three companies, with each fund's total capital ranging between 340 billion won and 500 billion won. This fund will invest at least 30% in assets suitable for core investment strategies, such as data centers (IDC), urban logistics, and life sciences, with the remainder allocated to office and retail properties. Investments in office properties can be made in undervalued high-quality assets, and the fund may participate in development projects in partnership with strategic investors. The minimum target IRR, after fees, is 8.3%.

The NPS plans to select and announce the managers for the lending fund in November and for the core platform fund in January next year.

 

 

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