Ritz Weakness... Investment Opportunity for Retail Investors

Seo Cheol-su, CEO of NH Nonghyup REITs Management

Most Decline Due to Rising Interest Expenses

A Time to Separate the Wheat from the Chaff in a Rising Interest Rate Environment

Need to Monitor Promised Dividend Payments

[Asia Economy Reporter Park So-yeon] "From the perspective of individual investors, now is actually the right time to invest as REITs' stock prices are weak."

Seo Cheol-su, CEO of NH Nonghyup REITs Management, shared this outlook on the recent REITs and real estate market during a meeting with Asia Economy on the 22nd at the company's headquarters in Yeouido, Seoul.

Due to the recent consecutive interest rate hikes, concerns have emerged that increased loan interest expenses could reduce dividend profits, leading to a decline in most listed REITs' stock prices. This contrasts with the earlier trend this year when REITs were gaining attention as inflation hedges and their stock prices were rising.

Regarding this, CEO Seo said, "Now is actually the right timing to invest," adding, "However, if you plan to invest in REITs, you should closely monitor how each REIT pays the dividend amounts originally projected in their investment prospectuses after the second half of this year."

NH REITs Management is also planning to establish a private REIT based on landmark office buildings located in Busan in the second half of this year.

CEO Seo stated, "We plan to establish a private REIT that secures stable returns through the participation of professional investors and, unlike listed REITs, does not incur valuation gains or losses due to market price fluctuations," adding, "We expect this to respond to investment demand and expand managed assets."

Regarding existing listed REITs, he mentioned plans to incorporate new assets to enhance product quality and liquidity. All One REIT plans to add two office buildings and a shopping mall in the Honam region, where prime tenants such as Samsung Life Insurance and Lotte Shopping are located, and which offers relatively higher rental yields compared to the metropolitan area, through its subsidiary REIT.

In the case of NH Prime REIT, the value of its underlying assets has increased by more than 35% compared to the time of acquisition, and considering dividends from capital gains expected from asset sales starting early next year, a continuous recovery in stock price can be anticipated.

In the fund business division, there is a plan to purchase new prime assets worth approximately 300 billion KRW in the second half of this year. CEO Seo said, "We plan to focus on establishing a stable business foundation through the second half of this year and the first half of next year," adding, "We will proactively secure prime properties in advance and actively participate in private contracts and bidding."

He also mentioned, "We are promoting overseas ESG fund-of-funds investments and plan to concretize eco-friendly power generation projects in the Gyeongbuk and Jeonbuk regions of Korea."

However, to prepare for uncertain market conditions, a cautious investment review period will be observed for the time being. CEO Seo said, "Since the first quarter of this year, most projects based on specific initiatives have been delayed," adding, "We will thoroughly review ongoing projects but plan to proceed with actual investments when market uncertainties are somewhat resolved."

CEO Seo predicted that the current market situation caused by the impact of interest rate hikes will serve as an opportunity to separate the wheat from the chaff in investment. He forecasted that although asset prices, including real estate, surged globally during the pandemic due to ultra-low interest rates worldwide, the recent trend of rising interest rates will lead to a positive effect of adjusting real estate prices to appropriate levels and stabilizing the market.