SK REITs, Smooth Refinancing... Next Step is Stock Price Recovery

Recovery Trend Continues Since February This Year
Lowest Price 3,710 Won → 4,615 Won

The SK REITs stock, which had retreated until early this year due to delayed interest rate cuts and sluggish real estate market conditions, has been steadily rebounding over the past four months. The stock price is recovering as the company successfully raised funds by issuing public bonds.

According to the financial investment industry on the 5th, SK REITs stock price has risen 23% since February. This outperforms the KOSPI's 6.6% increase during the same period by more than 16 percentage points (P). The upward trend has continued since hitting the year's lowest price of 3,710 KRW on February 1.

SK REITs aims to purchase and manage prime real estate owned by SK Group and highly attractive investment properties to provide stable dividends to shareholders. Its underlying assets include SK Seorin Building, Jongno Tower, SK-U Tower, SK Energy gas stations, and the Icheon Campus water treatment center. The asset size is approximately 4.3 trillion KRW. SK Inc. is the largest shareholder, holding a 32.4% stake. On a consolidated basis for Q1 last year, operating revenue and operating profit were 52.3 billion KRW and 35.4 billion KRW, respectively, marking increases of 71% and 57% compared to the same period last year. Net income for Q1 was 5.8 billion KRW.

A REIT (Real Estate Investment Trust) is an indirect real estate investment vehicle that collects funds from multiple investors under the Real Estate Investment Company Act, invests in real estate and real estate-related securities, and distributes the income generated to investors. SK Seorin Building and SK U-Tower are used by SK Inc. and SK Hynix, respectively, so vacancy concerns are minimal. SK Energy gas stations are leased by SK Energy, and the water treatment center is leased by SK Hynix, ensuring stable income prospects.

Despite the stable operational income outlook, the stock price was sluggish until the end of January this year. This was due to concerns over deteriorating profitability and repayment of existing loans amid rising borrowing costs. Approximately 1 trillion KRW of borrowings mature in the first half of this year, and the higher the interest rate increase from the low 2% range, the more inevitable the profitability decline. To stabilize borrowings, the company planned to extend and diversify maturities through corporate bonds and other means. The plan proceeded smoothly as the company issued corporate bonds and public bonds, confirming this by successfully raising 240 billion KRW through bond issuance on the 22nd of last month. The funds will be used to repay debts maturing in June and July of this year.

Researcher Park Sera of Shin Young Securities explained, "From this year, rental income from the water treatment center will be recognized, allowing verification of profitability," adding, "With the addition of the water treatment center, operating revenue this year is expected to exceed 200 billion KRW annually." She also forecasted, "A total of 1.2 trillion KRW in borrowings will mature this year, but refinancing will proceed smoothly due to favorable funding conditions."