[The Era of Urban Maintenance Trusts④] Heads Leading Trust Companies Say "Let's Grow the Market Pie"

Seeking 'Solutions' through Land Trusts, REITs, and Redevelopment Projects
Reappointment Becomes Common... Proactive Response to Changes in the Real Estate Market

[Asia Economy Reporters Kyungjo Noh, Dongpyo Kim, Seoyul Hwang] "While rankings based on sales and performance are important, expanding the overall pie of the trust industry itself is the priority. We are all working together toward this goal." (Korea Land Trust official)

Real estate trust companies are expanding their presence through various business lines such as land trusts, urban regeneration, and REITs (Real Estate Investment Trusts). Trust-based redevelopment projects are one such area, with the government expressing its intention to revitalize them through the August 16 measures, which is encouraging.

Currently, the 14 real estate trust companies in operation are broadly divided into bank-centered financial holding groups and non-financial groups. Their leaders take a conservative approach to business for asset soundness management, while not hesitating to try new initiatives to expand the market and discover future growth engines.

As a result, the real estate trust deposits have continued to grow steadily since hitting a low point in 2013, mainly driven by land and collateral trusts. According to the "Status and Implications of the Real Estate Trust Industry" report published by the Korea Capital Market Institute in April last year, real estate trust deposits rose about 2.2 times from 125 trillion KRW at the end of 2014 to 277 trillion KRW at the end of 2020, growing at an average annual rate of 14.2%.

◆ Hantosin and Hanjashin as the 'Big 2' with Koramco in a close race

Insignia Banpo Bird's-eye View [Provided by Koramco Asset Trust]

The head of the trust industry elder, Korea Land Trust (Hantosin), is CEO Choi Yoon-sung. Since his appointment in 2017, CEO Choi has worked to diversify Hantosin's revenue structure, which had been concentrated on loan-type land trusts. Contributions to new growth engines such as redevelopment projects and REITs resulted in the company's largest order record since its founding in 2020. The proportion of revenue from land trusts dropped below 50%.

CEO Choi, who was promoted from president to vice chairman at the end of last year, plans to expand orders for trust-based redevelopment projects going forward. The government's easing of reconstruction regulations has created a generally positive outlook across the industry. Hantosin has also maintained its position as the number one brand in the industry for a long time.

Korea Asset Trust (Hanjashin), under the MDM Group, is significant as the first developer (real estate developer) to enter the financial industry. It started as a subsidiary of Korea Asset Management Corporation (KAMCO).

Hanjashin has been led by CEO Kim Kyu-chul for 12 years. As the longest-serving CEO in the trust industry, he successfully listed the company on the KOSPI market in July 2016 and led MDM's vertical integration of real estate finance. Known for his meticulous personality, CEO Kim is said to be hands-on in operations. He also strengthens communication by regularly having lunch with employees to hear their concerns.

Koramco Asset Trust recorded the highest sales among domestic real estate trust companies in the first half of this year. With 131.8 billion KRW, a 12% increase from the same period last year, it had a significant gap over second-place Hantosin (90.1 billion KRW). This success is attributed to its expertise in construction development and strong performance in the REITs sector.

In particular, since CEO Jung Jun-ho took office in 2019, the company has achieved management stabilization. CEO Jung, who came in as a savior for Koramco Asset Trust, is a 31st administrative examination pass. He is a bona fide financial expert with experience at the Ministry of Finance and the Financial Supervisory Commission.

Koramco Asset Trust is currently directly developing and selling 'Insignia Banpo,' a high-end residential officetel complex in Bangbae-dong, Seocho-gu, Seoul. CEO Jung said, "Koramco's strength lies in maximizing the value of real estate assets. Based on the synergy of the three business areas Koramco operates?REITs, real estate funds, and real estate trusts?we will discover good investment opportunities."

◆ Successive CEO renewals... Daetoshin and Mugunghwa thriving

Perspective view of the small-scale reconstruction project of Mirim Housing in Yeondong, Jeju. [Source=Daehan Land Trust]

Daehan Land Trust (Daetoshin) has achieved improvements in financial soundness and profitability since CEO Lee Hun-bok took office in early 2019. CEO Lee fully leveraged his 30 years of experience and network accumulated at Daewoo Construction.

As a result, Daetoshin's borrowings decreased significantly from 391.9 billion KRW in 2018 to 123.8 billion KRW last year, and the debt ratio dropped from 172.5% to 51.8% during the same period. At the same time, operating profit rose from 31.3 billion KRW to 69.5 billion KRW, and net profit increased from 24.7 billion KRW to 52.2 billion KRW, setting record highs.

Recognizing these achievements, CEO Lee's term was extended until February 2023. This is the second case of reappointment among Daetoshin's CEOs. This year, CEO Lee plans to actively expand business, including responsibility-completion type land trusts. Based on the improved financial environment, he aims to raise credit ratings and focus the business structure on REITs and urban development projects.

A Daetoshin official said, "We plan to expand operations more stably in each area, including loan-type land trusts, responsibility-completion guaranteed management-type land trusts, REITs, and redevelopment projects."

Mugunghwa Trust, emerging as a dark horse in the trust industry, is led by CEO Kwon Jun-myung. Last year, when CEO Kwon secured his reappointment, Mugunghwa Trust achieved its best-ever performance, with 7.6 billion KRW in operating revenue from redevelopment projects considered a key factor. CEO Kwon is said to have anticipated difficulties in supplying land in the metropolitan area and has consistently focused on redevelopment projects since taking office.

This year, Mugunghwa Trust established a development business division to focus on loan-type land trusts. Despite the impact of rising interest rates, CEO Kwon plans to collaborate with developers to promote undervalued prime project sites. He is also actively exploring opportunities in the REITs market.

◆ Financial trust leaders equipped with risk management and expertise

Perspective view of the small-scale reconstruction project of Daedo Apartment near Seoul National University Station. [Provided by Woori Asset Trust]

KB Real Estate Trust, growing on the foundation of land trusts, has been led by CEO Seo Nam-jong since January last year. He is the first CEO from KB Financial Group among past leaders and previously served as Executive Vice President and Chief Risk Officer (CRO). His sales and risk management capabilities are considered optimal for proactively responding to changes in the real estate market paradigm.

He is meeting the holding company's expectations for stable business expansion amid intensifying competition. Last year, KB Real Estate Trust's operating revenue was 168.8 billion KRW, a 21.6% increase from the previous year. Operating profit (110.4 billion KRW) and net profit (81.5 billion KRW) rose by 20.3% and 21.8%, respectively.

Lee Chang-jae, CEO of Woori Asset Trust, who succeeded in reappointment this February, joined Woori Bank in 1979 and was promoted step by step. Since his appointment in December 2019, CEO Lee has restructured the business portfolio to move away from low-profit collateral trust-centered operations.

He also drove performance growth based on the group's credit rating and formed an urban business team in July 2020 to pursue small-scale redevelopment project orders. Following small-scale reconstruction projects such as Daedo Apartment near Seoul National University Station and Daheung Complex near Namguro Station, the company is pursuing orders for the Garohousing Redevelopment Project near Ujangsan Station in Gangseo-gu in the second half of this year.

Shinhan Asset Trust's CEO Bae Il-gyu is regarded as a trust-specialized CEO. After working at GS Construction, he entered the trust industry by joining Daehan Real Estate Trust in 1999. He joined the predecessor company Asia Trust in August 2007 and has held the CEO position since January 2014.

Under CEO Bae's leadership, Shinhan Asset Trust's operating profit (99.3 billion KRW) and net profit (75.8 billion KRW) increased by 58% and 66%, respectively, last year compared to the previous year, thanks to increased orders for responsibility-completion type land trusts. Becoming a 100% subsidiary of Shinhan Financial Group also expanded its business scope. CEO Bae was granted an additional one-year term extension at the end of last year.