The National Pension Service of Korea (NPS) has awarded mandates to Pebblestone Asset Management and Pacific Asset Management to run its latest domestic value-add real estate fund, totaling ₩500 billion (approx. USD 375 million). Each manager will oversee ₩250 billion.

According to investment banking sources, the decision came after months of intense competition among mid-sized managers. NPS’s move drew wide industry attention: in a market constrained by higher interest rates and sluggish real estate activity, the blind-pool commitment represents a rare infusion of liquidity.

Market participants note that strong performance could pave the way for re-ups, potentially expanding the program beyond the initial ₩500 billion.

NPS structured the program with unusually flexible but demanding terms. Leverage is permitted up to 75% LTV at the asset level and 70% across the portfolio. The investment scope covers all domestic property sectors except residential. NPS set a minimum net IRR hurdle of 11%, offering up to 18% carry above that threshold.

To ensure true risk-sharing, managers are required to co-invest at least 2% of the mandate, with commitments to be made by lead portfolio managers themselves.

Moreover, NPS demanded fund-level capitalizations of ₩295–415 billion, meaning managers must secure an additional ₩40–160 billion of matching capital on top of the NPS allocation.

Crucially, eligibility was restricted to firms with AUM under ₩5 trillion—an effort to support smaller yet innovative managers that have demonstrated differentiated capabilities in the market.

Founded in 2015, Pebblestone has become one of Korea’s leading independent real estate managers, known for sourcing undervalued assets and executing disciplined repositioning. The firm has progressively shifted from core to value-add strategies, with standout results in the office sector.

A flagship case is the Narae Building (now AP Tower) in Yeoksam, acquired for ₩78.5 billion in 2018 and sold for roughly ₩170 billion in 2021 after a full repositioning—interior and exterior renovation, lease restructuring, and tenant diversification. The deal is widely cited as a textbook value-add success story.

Pebblestone highlighted its ability to identify mispriced assets with quick rent recovery potential during the NPS pitch. It has also bolstered deal-sourcing credibility through proprietary capital commitments and deep ties with global institutions including AEW, Blackstone, and PAG.

Notably, Pebblestone partnered with Blackstone in acquiring the Seongkwang Logistics Center in Gimpo and raised offshore capital for Seoul office acquisitions such as the Wooshin Building.

For the new mandate, Pebblestone proposed securing over half of its AUM from foreign investors—aligning with NPS’s emphasis on both risk-sharing and international information flow.

Pacific, founded in 2016, earned its spot through a strong value-add track record across multiple sectors, with particular dominance in data centers. Its landmark project, the Jukjeon Data Center in Yongin, underscored both development and financing capabilities: Pacific successfully closed a ₩1.12 trillion refinancing package in 2024.

The firm has repeatedly teamed up with Canada Pension Plan Investment Board (CPPIB) on large-scale developments, cementing its reputation for global partnerships—a key factor for NPS, which required active sharing of overseas investor intelligence.

Beyond data centers, Pacific has demonstrated versatility, such as the Gravity Seoul Pangyo hotel investment, showing its ability to manage complex operating structures.

An IB executive commented: “NPS appears to have struck a balance: Pebblestone brings proven office repositioning expertise, while Pacific offers diversification and strong credentials in new-economy assets like data centers.”