SOC and Overseas Real Estate REITs Resume IPOs Delayed by Legoland Incident

KB Balhae Infra, Shinhan Global Active, Daishin Global Core Await Listing
Liquidity Crunch Eases, Investment Sentiment Gradually Revives Amid Final Phase of Interest Rate Hikes

REITs (Real Estate Investment Trusts) that had postponed their initial public offerings (IPOs) due to interest rate hikes and the Legoland incident are showing signs of resuming their listing efforts. With the global interest rate hikes nearing their end, they plan to enter the stock market by leveraging the somewhat revived investor sentiment.

According to the investment banking (IB) industry, KB Balhae Infrastructure REIT, Shinhan Global Active REIT, and Daishin Global Core REIT are preparing for listings within this year. An IB industry official stated, "REITs that postponed their listings last year due to deteriorating market conditions are now preparing to time their listings again to raise capital."

The Balhae Infrastructure REIT, considered the most likely to go public, is a private infrastructure fund established and managed by KB Asset Management in 2016. It mainly invested in toll roads such as the Shin-Daegu-Busan Expressway, Seoul Yongma Tunnel, Namyangju Urban Expressway, Suwon Outer Ring Road, and Sanseong Tunnel. Seventeen investment institutions, including Kookmin Bank, National Pension Service, Government Employees Pension Service, and Private School Teachers’ Pension, contributed a total of 1.19 trillion KRW to form the fund. Although the shareholders’ meeting last year decided to pursue a listing, it was postponed due to interest rate hikes and liquidity tightening.

Shinhan Global Active REIT is a re-investment type REIT that invests in US real estate fund beneficiary certificates created by Shinhan REITs Management. Through its subsidiary REIT, Shinhan Global No.1 REIT, it purchased beneficiary certificates of US Government Building Fund, PRISA Fund, and US Core Partners Fund. The US Government Building Fund invests in 16 offices leased by the US federal government and state and local governments. PRISA Fund and US Core Partners Fund are large funds investing in over 100 offices, logistics, and retail-related properties across the US.

Daishin Global Core REIT is a REIT established by Daishin Financial Group. It is known to have invested about 900 billion KRW in overseas assets such as rental housing in Tokyo and offices in New York. It lost momentum for listing last year due to difficulties in securing institutional investors amid the overseas real estate downturn. Recently, Daishin Asset Trust’s plan to acquire a large domestic office building has sparked speculation that this building will be incorporated into the REIT to pursue a listing. Daishin Asset Trust was selected as the preferred bidder in the sale of Golden Tower, an office building located in Samseong-dong, Gangnam-gu, Seoul.

If Balhae Infrastructure REIT succeeds in listing, its market capitalization is expected to reach about 1.7 trillion KRW. Shinhan Global Active and Daishin Global Core are each projected to have market capitalizations of around 400 billion KRW. An IB industry official explained, "Investment preferences among institutional investors vary depending on investment regions and types of buildings, so it is difficult to expect all REITs to achieve successful listings."

There is also analysis that this is an opportune time for REITs to raise new capital through listings and acquire high-quality real estate at reduced prices. A securities firm alternative investment official explained, "For REITs to expand their scale by acquiring high-quality real estate at low prices, capital raising is necessary, and for that, listing is essential." The official added, "Although the US commercial real estate market continues to be sluggish, REIT stock prices are recovering rapidly, which reflects market expectations for recovery."