Top companies in Korea eye REITs for financing purposes

The exterior view of Starfield Hanam. (Shinsegae)

South Korean conglomerates are ramping up efforts to establish real estate investment trusts (REITs), actively seeking to acquire high-quality real estate assets while securing large-scale funding.

According to industry sources on Tuesday, Shinsegae Property’s subsidiary, Shinsegae Property Investment Management, is set to apply for regulatory approval for its REIT business in October.

The REIT business will be backed by the Starfield Hanam shopping mall as its primary asset. Shinsegae Property currently holds a 51 percent stake in the mall, with Taubman holding 32 percent and Blackstone 17 percent.

Starfield Hanam, the first suburban mega shopping complex under the Shinsegae Starfield brand, spans 460,000 square meters and is home to key tenants like Tesla, Aquafield, and Gourmet Street.

Since its opening in 2016, Starfield Hanam has maintained a near-zero vacancy rate and has been praised for its continued revenue growth, driven by high rents and revenue-sharing lease agreements.

Shinsegae Property plans to reinvest in common shares of the REIT to maintain its management control and is targeting an initial public offering (IPO) next year.

Other Korean conglomerates are also stepping up their REIT business.

D&O, a company under LG Group responsible for real estate asset management and leisure business operations, has selected REIT as a new business focus since last year.

The company has been consulting with various real estate firms in preparation for launching its REIT business, which is expected to include LG Group-owned properties such as the LG Twin Towers, LG Electronics’ Gasan office, and the LG Gwanghwamun Building.

D&O has also been actively pursuing new assets.

The company recently submitted a bid to acquire Dream Tower in Seoul’s Sangam area.

Currently serving as the headquarters for LG HelloVision, Dream Tower is a premium office building with a floor area of 38,075 square meters across 15 floors and a near 1 percent vacancy rate.

Other major corporations are moving quickly to integrate new assets into their REIT portfolios while raising capital.

Samsung FN REIT is set to acquire Samsung Fire & Marine Insurance’s office in Pangyo later this month. The company raised 64.2 billion won ($48.34 million) through a rights offering to existing shareholders in early September as part of its financing efforts.