Korea’s POBA Commits $100M to US Real Estate Credit Fund 3560 REIT

US commercial real estate lender and loan servicing firm 3650 REIT said late last week that it has received a $100 million commitment from Korea’s Public Officials Benefit Association for a US real estate credit fund focused on bridge and special situation opportunities.

To be managed under what 3650 calls its Bridge and Event-Driven, or BED, strategy, the company says the capital will to be used to expand that lending initiative, which “focuses on shorter-term loans for borrowers pursuing ground-up construction, acquisitions, repositionings, recapitalizations or the restructuring of partnerships.”

“3650 is an ideal partner for POBA as we continue to seek international relationships with leading alternative assets firms in the US and worldwide,” said Harry Song, head of overseas real estate for POBA. “The firm’s ability to utilise its lending experience and expertise through multiple real estate market cycles to deploy capital, even amidst today’s sector-specific and economic challenges, make it an attractive option to generate appealing, risk-adjusted returns for our fund members.”

With rising interest rates presenting challenges to real estate equity investments at the same time that they offer rewards to lenders some of the world’s largest property investors have been pivoting to debt investment strategies and developing debt funds, including Invesco Real Estate rolling out a private credit trust in June and Blackstone closing on $5.2 billion in August for the latest edition of its Tactical Opportunities Fund, which invests in private equity and private credit.

Refinancing Demand

“We are very excited to establish a mutually beneficial connection with POBA and look forward to growing a long-term relationship,” said 3650 REIT co-founder and managing partner Jonathan Roth. “This strategic capital commitment is yet another testament to the strength of 3650’s lending approach, which continues to garner attractive, risk-adjusted returns for our institutional investors around the globe.”

In May of this year 3650 REIT originated a more than $103 million mezzanine loan on behalf of a joint venture between David Werner Investments, Onyx Partners and Carlton Associates to recapitalise a 12-property multifamily portfolio in the US via its BED strategy.

In 2021, the company originated more than $1.45 billion in loans, including a $95 million refinancing of a California shopping centre, according to an announcement.

POBA’s commitment follows earlier investments in 3650 REIT’s BED strategy by California state pension fund CalSTRS and Abu Dhabi government vehicle Mubadala, with CalSTRS having been a lead investor in an earlier vehicle by the company which closed on $580 million in capital in January 2021. Founded in 1952, the Seoul-based Public Officials Benefit Association had nearly KRW 19 trillion ($16 billion) in assets under management at the end of 2022.

Founded in 2018, Miami-based 3650 originates portfolio loans on behalf of its institutional partners across a broad swath of US markets and both holds and services each loan through maturity which the company sees as aligning its interests with project sponsors.

With strategies including mortgage loans and other vehicles, 3650 currently has $5.2 billion in loans originated across its lending platform and services more than $16 billion from its rated servicing platform.

“As fund allocators seek reliable havens for their capital in the US, 3650’s high-touch, hands-on, property-level approach remains attractive for those looking to make longer-term investments backed by sponsors with well-located, relevant assets,” said 3650’s Roth.

Credit in Vogue

In a call with analysts releasing its third quarter results last week, Blackstone chairman and chief executive Stephen Schwarzman pointed to private credit as one of the firm’s brightest opportunities in the current market.

Announcing an integration of its credit groups into a single unit, Schwarzman said, “We believe these changes will further accelerate growth, and the BXCI real estate credit collectively could grow AUM from approximately $370 billion today to $1 trillion within the next 10 years, given the powerful secular tailwinds and strength of our platform.”

While private credit has been catching on in more developed financial markets, Asia Pacific accounted for just 6.2 percent of assets under management by commercial real estate lending strategies in 2022, according to a report in August this year by CapitaLand Investment.

Despite being a small slice of the world market, real estate assets under management by private credit strategies grew at a compounded annual growth rate of 19.5 percent in the five years ending in 2022, up from 12.2 percent over the past decade, the report showed.