The Once-Thriving 'Gongmo REITs'... Why Are They Now Neglected?

Aegis Value, Mirae Asset Maps, and Others Show Low Subscription Competition Rates Compared to Last Year’s First Half
Increased Volatility Raises Focus on Capital Gains... "Less Attractive Compared to Second Half" Analysis

[Asia Economy Reporter Minji Lee] The sluggish performance of REITs stocks in the domestic stock market is also continuing in the initial public offering (IPO) market. This is interpreted as investors expanding their interest to stocks that can yield greater capital gains than the returns offered by REITs due to increased volatility in the stock market. Moreover, with logistics centers, gas stations, and other assets expected to be listed as REITs in the near future, there is an analysis that recently launched REITs have become relatively less attractive.

◆ Public Offering REITs Fail to Attract Interest in IPO Market = According to industry sources on the 21st, three REITs that recently conducted general public subscription?Aegis Value REIT Plus (26.86 to 1), Aegis Residence REIT (2.55 to 1), and Mirae Asset MAPS No.1 REIT (9 to 1)?all recorded subscription competition rates lower than last year. Lotte REIT (63.28 to 1) and NH Prime REIT (317.62 to 1), which were listed last year, achieved high competition rates among general investors.

The main reason for the decreased interest in public offering REITs is that investors have shifted to places where they can earn higher profits than the returns provided by REITs due to increased volatility in the stock market. Demand for individual stocks that yield more than 8% in a single day is greater than for REITs that provide an 8% annual return. An industry insider said, "Liquidity is flowing into secondary batteries and bio sectors, so dividend yields of 5-8% per year will not move investor sentiment," adding, "Investors will likely enter REITs only during the dividend season to receive dividends and then exit."

Some REITs have even abandoned public subscription despite conducting demand forecasting for institutions. Masterton Premier No.1 REIT, which attracted attention as the 'first overseas real estate REIT,' conducted demand forecasting over two days from the 16th to 17th and was scheduled for public subscription starting the 22nd but canceled the listing due to low interest in public offering REITs. JR Global REIT, which invests in overseas real estate, is proceeding with public subscription as planned from the 22nd. Since it has a similar product concept to Masterton Premier No.1 REIT, the industry estimates that the demand forecasting results announced on that day were poor.

The sluggish stock price trends of REITs already listed on the stock market also seem to have affected investor sentiment. NH Prime REIT, listed at the end of last year, has fallen about 27% compared to early this year. Aegis Value REIT, listed this year, is trading at around 4,470 won, about 10% below its public offering price of 5,000 won. Kim Jong-min, head of Masterton Investment Management's overseas division, said, "The liquidity in the stock market is concentrated in specific sectors, causing some REIT stock prices not to reflect their intrinsic value."

◆ "More Attractive Properties Await in the Second Half" = Some speculate that the presence of more attractive properties waiting in the future than those recently listed may have influenced the lack of enthusiasm. The most important factor in REIT investment is the type of properties held, and the REITs that have recently been listed are indirect REITs centered on offices, which are less attractive than the logistics centers and gas stations held by later entrants.

Indirect REITs are REITs that do not directly own real estate but reinvest in REITs or real estate funds that own assets. Aegis Value REIT Plus, Aegis Residence, and Masterton Premier No.1 REIT all have indirect REIT structures, and JR Global REIT invests indirectly in private REIT stocks.

An industry insider pointed out, "Since many REITs are going public this year, investors likely evaluated each condition carefully before entering demand forecasting," adding, "Indirect fund REITs do not directly manage assets, so their structure is relatively weaker than general REITs that can remodel assets to increase dividend yields."

Meanwhile, in the second half of the year, Coramco Energy Plus REIT, D&D Platform REIT, Shinhan Seobu T&D REIT, and ESR Kendall Square REIT are preparing for listing. ESR Kendall Square REIT's listing schedule is expected to be delayed due to setbacks in contracts for its core logistics center assets.