Korean, Japanese investors diverge at PERE Japan Korea Week

Over 400 members of the PERE Network gathered at PERE Japan Korea Week last week to hear about the challenges and opportunities investors from both countries are seeing in the current market environment, News.Az reports.

At the week- long event, Japanese and Korean investors underscored their dissimilarities as real estate capital allocators, with Korean investors remaining much moreg cautious about new investments than their Japanese counterparts. However, both groups were alive to opportunities emerging from price corrections both inside and outside of the Asia-Pacific region.

At the Seoul event that kicked off PERE Japan Korea Week, investors like National Pension Service of Korea and Public Officials Benefit Association spoke onstage about how they are returning to a more proactive strategy in real estate investments to capitalize on market disruptions. However, many other Korean investors remain cautious about new commitments, as noted by delegates that included capital advisers, fund managers and Korean institutional investors.

Jun Park, the team leader of the real assets investment department at Hyundai Marine CR Fire Insurance, shared during the investor Panel in SeouI that the insurer is adopting a conservative approach due to past investment losses.

"Valuations for overseas real estate have gone down. So theoretically speaking, it makes sense to invest now because this will be a good vintage. But we can't take on an aggressive stance at this point because of the issues with legacy assets,"' he said,
An Asia-based director at a US capital advisory firm added that NPS and POBA are outliers and not representative of most Korean institutional investors. In fact, many are more like Hyundai Marine & Fire Insurance in that they continue to struggle with refinancing issues related to their existing investments and lack the liquidity needed to invest.

Compared with Korean investors, Japanese investors have fewer legacy issues in their portfolios and more room to invest in real estate, as many are relatively new to the asset class. Ayaka Takimoto, executive director at the Japan Science and Technology Agency, mentioned during an investor panel at the Tokyo event that the organization is "extremely under-allocated" to real estate. Established in 2022, JST aims to provide long-term and stable financial support to Japanese universities for international research and doctoral studies. With a new portfolio, the investor has minimal legacy issues and therefore can focus on new fund investments, particularly in emerging and niche real estate sectors, according to Takimoto Junichi Yonezawa, head of alternative investments at Norinchukin Zenkyoren Asset Management - the asset management business of Norinchukin Bank and Japanese insurer Zenkyoren - pointed out that Japanese institutional investors traditionally have low real estate allocations, prioritizing fixed income and listed equities. However, he anticipated that their real estate allocations will grow as more investors diversify into alternatives, starting with private equity and private debt before venturing into real estate and infrastructure.
Moving up the risk curve Both Japanese investors and Korean institutions unencumbered by legacy issues show willingness to move up the riska curve in real estate. Japanese institutions are increasingly exploring value-add and opportunistic investments over core strategies.

Yonezawa noted that returns from core investments overseas have diminished as hedging costs rise, prompting investors to adopt value-add strategies for higher returns. In addition, the current market dislocation has presented attractive opportunities for value-add and opportunistic investments.

Takimoto revealed that, JST has begun investing in value-added and opportunistic real estate, driven by the ongoing development of its real estate program and opportunities arising from price adjustments in the asset class. Meanwhile, the investor has become cautious about core real estate investments unless prices are favorable, Some Korean investors are similarly risk-on as they prioritize returns over diversification at the present time. ""We all lost money. So if there is an opportunity to make that money with available capital, I think that Idriving return] is going to take priority over global diversification, said a global institutional investor in Seoul, referring to potential opportunities arising from more significant price corrections in the US and Europe compared to Asia-Pacific. "Although we need to invest more in Asia for resilience, I'm uncertain if the returns there will match those in the recovering Western markets."

News.Az