[Funding] Shinhan Seobu TND REITs Ahead of IPO, Borrows 72 Billion KRW Secured by 'Yongsan Grand Mercure Hotel'

A view of Dragon City Hotel in Yongsan-gu, Seoul.

[Asia Economy Reporter Lim Jeongsu] Shinhan Seobu TND REITs secured 72 billion KRW in funding by using the Grand Mercure Hotel within the Dragon City Hotel in Yongsan, Seoul, as collateral ahead of its stock market listing scheduled for the 10th. This fund will be used for the hotel acquisition.

According to the investment banking (IB) industry on the 2nd, Shinhan Seobu TND REITs received a loan of 72 billion KRW from a lending consortium composed of financial companies. The maturity is three years, with the option for early repayment before maturity. Hana Bank acted as the lead arranger for the loan.

Shinhan Seobu TND REITs is a real estate investment trust (REIT) established by Seobu TND for group asset restructuring and is preparing for its stock market listing on the 10th. Seobu TND holds the majority of the shares. After listing, Seobu TND will hold 50%, the asset management company (AMC) Shinhan REITs Management will hold 1.8%, and institutional and individual investors participating in the IPO subscription will hold 48.2% of the shares.

The raised funds will be used to acquire the Grand Mercure Ambassador Hotel & Residences Seoul Yongsan (Grand Mercure Hotel), part of the Seoul Dragon City Hotel located in Hangang-ro 3-ga, Yongsan-gu, Seoul. A real estate collateral trust contract was signed with the property as trust assets, and the trust priority beneficiary rights were provided to Hana Bank.

Shinhan Seobu TND REITs signed a purchase agreement with Seobu TND for the Seoul Dragon City Hotel last October. During the sale process, Seobu TND agreed to lease the property long-term. Additionally, the complex shopping mall "Square One" located in Yeonsu-gu, Incheon, will also be included as an asset. The net asset value (AUM) of the Grand Mercure Hotel is 180.8 billion KRW, and Square One is 387.5 billion KRW, making the total net asset value 568.3 billion KRW.

Going forward, Shinhan TND plans to develop the real estate it holds into logistics complexes, mixed-use residential and commercial facilities, data centers, etc., then incorporate them into the REIT to expand asset size and improve profitability. Candidate development sites include the Seobu Truck Terminal site in Sinjeong-dong, Yangcheon-gu, Seoul, the Najin Shopping Center site in Yongsan-gu, and the Square One 2 site in Incheon.

Shinhan Seobu TND REITs collected a total subscription deposit of 3.0396 trillion KRW during the three-day general subscription period starting on the 24th for the listing. The subscription competition rate reached 151.98 to 1, marking a successful reception. In the earlier demand forecast for institutional investors, 827 institutions participated, recording a competition rate of 564.84 to 1.

It is interpreted that the high profitability, including an approximately 8% dividend payout during the first 13 months after listing and an average expected dividend yield in the 6% range over the next five years, attracted investors. An IB industry official said, "With market interest rates still low at around 1%, REITs are gaining popularity as dividend yields exceed 5%."