[Click eStock] "Shinhan Alpha REITs, Successful Refinancing... Reduced Interest Rate Hike Risk"

[Asia Economy Reporter Ji Yeon-jin] Ebest Investment & Securities analyzed on the 9th that Shinhan Alpha REITs' refinancing through participation in the capital increase of Jari REITs reduces the risk of rising financing costs and can increase dividend resources depending on the loan situation of Jari REITs, which is positive.

Shinhan Alpha REITs invested in a total of seven office buildings with an investment asset size of 2.1 trillion KRW by additionally purchasing Wise Tower through Jari REITs last year. The average occupancy rate of these office buildings is 96.6%, which is considered a favorable level of occupancy rate considering the natural vacancy rate of office buildings is 5%.

Looking at the tenant industries of Shinhan Alpha REITs' office buildings based on area, the largest share is finance and insurance, followed by software development in second place, with these two industries accounting for about half of the leased area. The remaining 50% includes various tenant industries such as gaming and manufacturing, allowing risk to be mitigated through a relatively diversified tenant portfolio even during COVID-19. The lease contract maturity based on area is highest in 2028, indicating that short-term vacancy risk is limited.

Despite the recent trend of interest rate hikes, the fair value of office buildings is expected to increase annually. This is likely to lead to natural refinancing due to the increase in collateral value, and Shinhan Alpha REITs reflected the upward revised fair values of Samsung Fire & Marine Insurance Yeoksam Building and Wise Tower through an appraisal in February this year.

Researcher Kim Se-ryeon of Ebest Securities said, "Through the recent capital increase of 156.5 billion KRW, we plan to participate in the capital increase of Jari REITs, which holds the two properties, and use the funds for the cancellation of preferred shares and repayment of subordinated loans of each REIT," adding, "This refinancing reduces the risk of rising financing costs and at the same time, it is positive that dividend resources can increase due to loan repayment by Jari REITs."