ESR Raises $325M for First South Korea Real Estate Credit Fund

Hong Kong-listed ESR has raised $325 million for its first real estate credit strategy in South Korea, as the industrial builder and fund manager seeks to address a shortfall of financing options in Asia’s fourth-largest economy.

The new fund will target credit investments secured by high-quality real estate assets such as modern logistics facilities, data centres and infrastructure, ESR said in a release. The company will draw on its established relationships in South Korea, where it has $14.1 billion in assets under management across 7.2 million square metres (77.5 million square feet) of gross floor area.

The latest initiative builds on ESR’s experience in European private credit and comes less than two weeks after key ESR shareholder Warburg Pincus announced its backing of MA Financial Group’s Australia real estate credit venture.

“Our first credit fund in South Korea demonstrates our commitment to new economy assets and confidence in the country’s growth,” said ESR chief investment officer Josh Daitch. “This initiative meets the demand for private real estate credit and strengthens ESR’s leadership in real estate development across Asia.”

Market Track Record

ESR entered South Korea in 2015 and has continued to expand in the market, including with the launch of the country’s first perpetual open-ended core fund earlier this year with backing from the Canada Pension Plan Investment Board and a $400 million commitment from Dutch pension manager APG.

The perpetual fund intends to acquire high-quality income-producing stabilised assets, including those from an extensive development pipeline managed by Seoul-based subsidiary ESR Kendall Square. The vehicle’s seed assets include the flagship Bucheon Logistics Park, a 304,916 square metre facility in suburban Seoul’s Gyeonggi province.

ESR, which is the target of a buyout offer led by investors including Barry Sternlicht’s Starwood Capital, has seen continued strong investor interest for private real estate credit in South Korea and aims to satisfy that demand with the new credit fund, according to ESR Korea CEO Thomas Nam. No details were provided about the fund’s limited partners.

“ESR has built a strong track record and reputation in private credit markets in Europe, navigating economic cycles and changing market environments,” said co-founders and co-CEOs Jeffrey Shen and Stuart Gibson. “By leveraging our global experience and local relationships with companies and financial sponsors, ESR is well-equipped to identify and capitalise on high-quality investment opportunities that offer attractive risk-adjusted returns.”

Filling the Vacuum

Aiming to bridge the financing gaps left by traditional lenders in South Korea, the Abu Dhabi Investment Authority last month revealed its commitment to alternative asset manager SC Lowy’s private credit strategy focusing on the country’s real estate sector.

The fund will provide real estate credit to Korean developers, construction firms and domestic financial institutions, primarily targeting senior secured lending for residential, commercial and logistics projects in major cities, according to Hong Kong-based SC Lowy.

Also in September, Orion3, a fund manager backed by Li Ka-shing’s CK Asset Holdings, teamed with Manhattan-based Muzinich & Co on an infrastructure and real assets private debt strategy targeting a size of between $500 million and $1 billion.

In August, SeaTown Holdings International, an alternative investment unit of Singapore’s Temasek Holdings, reached a final close of its second private credit fund targeting APAC with over $1.3 billion in capital commitments.