Ritz Stocks Hit by Early Frost Surge 10% Since Last Month

KRX REITs TOP10 Index Rises Despite Legoland Incident
"Interest Rate Hikes, Real Estate Slump Raise Refinancing Concerns" Warning

[Asia Economy Reporter Minji Lee] Publicly offered REITs (Real Estate Investment Trusts), which suffered a sharp decline in stock prices due to the Legoland incident during the interest rate hike period, are showing an upward trend. Although concerns over refinancing and fears of dividend cuts caused stock prices to fall, the market has overcome the crisis with government measures, leading to improved investor sentiment.

According to the Korea Exchange on the 27th, the KRX REITs TOP10 index rose 3.85% from the 1st of this month to the day before, outperforming the KOSPI return (-6%). This index includes 10 publicly listed REITs and was the only thematic index calculated by the exchange to show an upward trend. Since the 1st of last month, it has recorded a double-digit increase of over 10%. Market capitalization also grew from 5.16 trillion won to 5.95 trillion won. This contrasts with the more than 16% plunge over one month following the Legoland incident in October, which significantly underperformed the KOSPI return (6.4%).

Investor sentiment appears to have revived as the liquidity crisis in the bond market was partially resolved through the government's large-scale capital supply measures. REITs raise funds for real estate purchases by borrowing from financial institutions or issuing corporate bonds. However, recently, with increased interest burdens and a rapidly freezing real estate market, investors fled like a tide due to concerns that REIT dividends might decrease.

Interest in REIT stocks grew again when some companies succeeded in asset sales and mentioned the possibility of dividend increases. Among the stocks included in the REITs TOP 10 index, the best performer since last month was Koramco Energy REIT, which rose more than 19%. On the previous day, it surged to 5,500 won intraday, marking a three-month high. This reflected expectations of increased dividend size following the consecutive sales of five gas station assets it held. Lee Kyung-ja, a researcher at Samsung Securities, said, “For the dividend to be paid in May next year (the 6th dividend), the remaining balance of the sold assets will be fully paid, and the disposal profit dividend is estimated at 206 won per share,” adding, “If the sale succeeds with a premium of over 20%, it can also increase the net asset value of the portfolio, which is positive.” Next, SK REITs showed good performance (18%), boosted by news of inclusion in the global REIT index ‘FTSE REITs.’

In addition, Lotte REITs (15%), ESR Kendall Square REITs (7.7%) with logistics warehouse assets, and JR Global REITs (4.4%) holding overseas assets also showed an upward trend. Conversely, Shinhan Alpha REIT fell more than 6.7%. This is analyzed as due to the withdrawal of the sale of its held asset ‘Yongsan The Prime’ amid unclear funding, which eliminated investors’ dividend expectations.

Experts agree that although REIT stock prices continue to rebound, caution is needed in investing as uncertainties in the real estate market downturn and interest rate hikes remain. Next year, the refinancing scale of REITs is expected to increase further, and if the real estate market does not recover, the appeal of dividend stocks may be lost. KB Financial Group Management Research Institute analyzed, “As the capital raising environment worsens, REITs face delays in realizing gains through asset sales, making portfolio changes difficult,” adding, “Although office sector prices are rising, there is also a possibility of downward adjustments in the future.”