ADIA and SC Lowy lay foundation for real estate credit in South Korea

September 24, 2024 (Preqin News) – The Abu Dhabi Investment Authority (ADIA) has made a substantial commitment to fund manager SC Lowy for real estate credit investments in South Korea.

Lionel de Somer, Chief Strategy Officer at SC Lowy, told Preqin News that there is growing demand for private credit in South Korea’s real estate sector: ‘We believe there is a large opportunity in the real estate sector, logistics, and infrastructure in general, due to banks retrenching because of increasing regulatory constraints and proactive provisioning policy, which is limiting their ability to finance projects and developers’ working capital.’

However, there is currently little capacity for real estate private credit in South Korea or APAC, despite rapid growth in private debt in the region. Assets under management (AUM) at APAC-focused real estate credit managers stood at just $6.3bn at the end of 2023, according to Preqin data. The proportion of dry powder to AUM has dropped steadily from 52% in 2019 to just 14% in December 2023, indicating that fundraising has fallen dramatically short of deployment.

Credit where it's due?

APAC-focused real estate credit AUM ($bn), 2019 – 2023

_{Source: Preqin Pro. Data as of September 2024}

‘Our focus areas, APAC and the Middle East, are largely untapped in terms of private credit,’ said de Somer. ‘We see a huge opportunity with stable returns of around 15% IRR and 1.5x MOIC and the ability to continue to deploy capital in the region. We don't face the same competition you see in Europe or the US, which is driving the returns down for those geographies. Given the lack of private capital in Asia, a booming economy, the need for private credit will increase in the next couple of years. The question is: do you have the ability to deploy that capital?’

Founded in 2009 in Hong Kong (SAR), SC Lowy has $1.6bn of AUM in private credit and hedge funds, with offices in Seoul, Singapore, Brisbane, Mumbai, Abu Dhabi, Milan, London, and New York. More than a third of its real estate credit investments have been in South Korea.

ADIA’s investment is via a separately managed account, with a significant proportion of the commitment already deployed. SC Lowy is currently raising capital for SC Lowy Strategic Investments Fund IV, an APAC-focused direct lending fund, which held a first close on $130mn at the beginning of 2024 and has a $500mn target.

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}