The 'Hot' REITs Market, Woori Financial Also Joins In

Subsidiary-Integrated Woori Asset Trust Applies for Preliminary Approval to Establish REITs AMC

[Asia Economy Reporter Koo Eun-mo] Woori Asset Trust, which was incorporated as a subsidiary of Woori Financial Group at the end of last year, is set to establish a REITs (Real Estate Investment Trust) Asset Management Company (AMC). As asset management companies and trust companies are actively establishing REITs AMCs, interest in the REITs business is growing day by day.

According to the financial investment industry on the 19th, Woori Asset Trust applied for preliminary approval from the Ministry of Land, Infrastructure and Transport on the 14th to operate a REITs AMC and is currently undergoing related procedures. Considering that preliminary approval for a REITs AMC generally takes 2 to 3 months and final approval about 3 months, it is expected that REITs operations can officially begin in the first half of next year. Woori Asset Trust plans to continuously prepare product development until obtaining the final approval and expects to launch its first product after mid-next year.

Recently, there has been active movement to establish REITs AMCs centered around asset management companies and trust companies. According to the Ministry of Land, Infrastructure and Transport, there were 30 domestic REITs AMCs as of the end of October last year, since Korea Land Trust was first approved in 2001. Recently, the establishment of REITs AMCs has accelerated, with six new companies obtaining approval within a year.

Most recently, KB Asset Management obtained final approval on the 12th, and Samsung SRA Asset Management and Hyundai Asset Management are awaiting final approval. Currently, Korea Investment Real Estate Trust, Inmark REITs Management, as well as general companies such as Hoban Construction and Hanra have applied for preliminary approval, and Kiwoom Investment Asset Management is also known to have started applying for preliminary approval. As the number of REITs AMCs increases, the market is also expanding. The number of domestic REITs increased from 230 at the end of August last year to 272 at the end of August this year, and total assets grew from 46.5 trillion KRW to 56.2 trillion KRW.

REITs are indirect real estate investment products that pool funds from multiple investors to invest in high-quality real estate and return the profits to investors. Since they allow investment in real estate with small amounts like stocks, they have recently attracted individual investors' attention. To operate public REITs, a REITs AMC must be established. According to the Real Estate Investment Company Act, the requirements for establishing a REITs AMC are a capital of at least 7 billion KRW and at least five professional management personnel. Woori Asset Trust's capital is approximately 15.3 billion KRW.

The recent surge in REITs AMC establishments is due to the government's announcement last September of the "Public Real Estate Indirect Investment Activation Plan," which acts as an incentive for operators to manage public REITs, including listed REITs. This plan expanded tax benefits for public real estate products, creating an environment where the profitability of public products can exceed that of private products. This naturally led individual investors seeking high returns to increase their interest in public REITs, and as market demand expanded, asset management companies and other operators looking to broaden their business scope and increase profitability actively entered the market. Additionally, as more companies seek to securitize real estate assets, demand for anchor-type REITs is also contributing to the AMC establishment boom.

Woori Asset Trust is targeting a specialized market where REITs participate not only in generalized underlying assets such as offices but also in housing projects and urban regeneration sectors. A Woori Asset Trust official stated, "We plan to leverage the advantage of our group company Woori Bank being the lead trustee bank for the Housing and Urban Fund to target products specialized in housing projects and urban regeneration."

Until now, REITs' underlying assets tended to focus on traditional assets such as offices and retail, but recently, various types of REITs incorporating gas stations and logistics centers as underlying assets have been launched. At one point, the 'New Stay (publicly supported private rental housing)' type of housing rental business rapidly increased its market share to over 60%, but due to policy changes and deteriorating profitability, rental housing REITs have recently been in a lull.

As a subsidiary of Woori Financial Group, various synergies are expected with group affiliates such as Woori Bank, Woori Comprehensive Financial, Woori Asset Management, and Woori Global Asset Management. The official explained, "We expect collaboration in asset management and funding, and if the bank launches public products, it will be able to meet the investment demand of customers seeking diverse products," adding, "Utilizing the bank's corporate network, it will also be easier to securitize products tailored to companies needing liquidity."

Furthermore, if final approval is obtained, since the trust business will be operated concurrently, they plan to link any trust business projects that can be converted into REITs products. In the long term, they also plan to pursue listed REITs targeting the year after next. Another Woori Asset Trust official said, "The stable and abundant capital strength of the financial group will help grow prime-grade listed REITs."