SK REITs Raises 1 Trillion KRW to Acquire 'SK Headquarters Building and 116 Gas Stations'

Participation of major lenders including Hana Bank and Shinhan Bank
Secured additional 155 billion KRW through pre-IPO equity investment
Planning KOSPI IPO within the year

▲Exterior view of SK Seorin Building, Jongno-gu, Seoul

[Asia Economy Reporter Lim Jeong-su] SK Inc.'s subsidiary SK REITs has raised over 1 trillion KRW in debt financing to purchase the SK Seorindong headquarters building located in Jongno-gu, Seoul, along with 116 gas stations. Combining pre-IPO equity investments and SK Group’s capital contributions, SK REITs plans to acquire SK Group-owned real estate assets totaling 2 trillion KRW.

According to the investment banking (IB) industry on the 6th, SK REITs secured a total of 601.8 billion KRW in loans from a lending consortium led by Hana Bank. The loan maturity is three years. The principal is to be repaid in a lump sum at maturity, but SK REITs may opt for early repayment under certain conditions.

The raised funds will be used for building acquisition. SK REITs had previously signed a contract to purchase the SK Seorindong headquarters building for approximately 1 trillion KRW. The SK Seorindong building is located in Jongno 1-ga, an area densely populated with commercial offices. Currently, SK Inc., SK Innovation, SK E&S, and other SK Group affiliates occupy the building.

SK REITs also obtained a loan of 450.1 billion KRW for the acquisition of SK Energy gas stations. The total amount borrowed by SK REITs to purchase group affiliate real estate assets amounts to 1.0519 trillion KRW.

Alongside the large-scale borrowing, SK REITs conducted a pre-IPO equity issuance worth 155 billion KRW. Investors in SK REITs’ shares included the National Credit Union Federation of Korea (47 billion KRW), Aegis Asset Management (47 billion KRW), Koramco Asset Management (47 billion KRW), Samsung Securities (5.5 billion KRW), Korea Investment & Securities (5.5 billion KRW), and Meritz Securities (3 billion KRW).

Combining SK Inc.’s capital contribution, the pre-IPO, and acquisition financing (debt), SK REITs plans to complete the acquisition of key assets such as the Seorin building and SK gas stations by early July. The total value of the real estate assets SK REITs is acquiring approaches 2 trillion KRW.

During the pre-IPO, SK REITs also promised investors a listing on the Korea Composite Stock Price Index (KOSPI). At the board meeting held on the 29th of last month, the decision was made to list on KOSPI within the year. The public offering size is expected to be around 200 to 300 billion KRW. The anticipated dividend yield is approximately 5%, which is considered high for such high-quality assets. After the public offering, SK REITs plans to be the first domestic REIT to offer quarterly dividends.

Even after the IPO, SK Group affiliates will continue to use the Seorindong headquarters building under long-term master lease agreements. SK Energy also plans to lease most of the SK gas stations. Since reputable companies will occupy these real estate assets and pay rent, the dividend stability is evaluated as high.

SK REITs stated that after the public offering, it will continuously pursue value enhancement activities, such as acquiring additional domestic and international assets or increasing the value of existing assets.