Raising Funds for Full Repayment... Reduction of Borrowings
Participation of Major Lenders Including Banks and Securities Firms
Possibility of Selling Assets Held for 'Group Rebalancing'
Speculation on 'Preparing' for Additional Acquisition of Affiliate Assets
SK Group-affiliated REITs secured 878.5 billion KRW in funding using the Jongno Seorindong headquarters building and 114 nationwide gas stations as collateral. This was to repay loans borrowed several years ago to purchase assets held by SK Group affiliates. There are also expectations that some assets held by SK REITs may be put up for sale as SK Group pursues business restructuring and rebalancing.
According to the investment banking (IB) industry on the 4th, SK REITs borrowed 441.8 billion KRW from a financial lending consortium consisting of banks and securities firms. The loan maturity is three years. SK REITs provided the SK Group headquarters located in Seorindong, Jongno-gu, Seoul as collateral. The Seorindong building houses SK Group affiliates, generating stable income, and its land value is high, with an estimated worth of about 1.3 trillion KRW.
SK REITs’ subsidiary REIT, ‘Clean Energy REIT,’ also raised 436.7 billion KRW from the financial lending consortium. Clean Energy REIT provided 114 nationwide gas stations transferred from SK Energy to the group-affiliated REIT as collateral. It is known that many financial companies, including banks and securities firms, participated in this loan as well.
The two SK Group-affiliated REITs plan to use the raised funds to repay existing loans maturing in July. SK REITs have loans worth 1.04 trillion KRW maturing this month, secured by the SK Seorin Building and SK Energy gas stations. Considering the loan amount of 878.5 billion KRW this time, it is estimated that the collateral loan size has been reduced by more than 160 billion KRW.
An IB industry insider said, "If a REIT’s borrowings increase, cash outflows due to loan interest increase, reducing dividend returns to investors," adding, "It appears that the refinancing process reduced some borrowings, thereby raising the REIT’s dividend yield." SK REITs conduct quarterly dividends, and due to successive asset acquisitions, the current dividend yield is understood to exceed 6%.
Last year, SK REITs grew into the largest listed REIT in Korea with assets under management (AUM) of 4.2 trillion KRW by purchasing the water treatment center held by SK Hynix for 1.1203 trillion KRW. In February, it also demonstrated its fundraising capability by successfully issuing 240 billion KRW worth of public corporate bonds at an interest rate of 3.9%.
In addition to the Seorindong headquarters, water treatment center, and gas stations, SK REITs hold prime assets such as U Tower in Bundang, Gyeonggi Province, and Jongno Tower. In 2022, it purchased U Tower for about 500 billion KRW and acquired Jongno Tower in Seoul, which was included in a fund managed by KB Asset Management, for 621.5 billion KRW.
As SK Group embarks on a company-wide ‘trimming of excess,’ there are expectations that assets held by the REITs may be disposed of. It is analyzed that except for the Seorindong headquarters and Jongno Tower, where SK Group affiliates are located, and the water treatment center handling SK Hynix’s wastewater, other assets could be up for sale. The related industry believes that most of the assets held by SK REITs have appreciated by about 10-30% since acquisition.
An IB industry insider said, "While SK Group could sell assets held by SK REITs to third parties, it is also possible that SK Group affiliates may sell prime assets they hold to SK REITs to quickly secure liquidity," adding, "During the group’s rebalancing process, SK REITs are expected to undergo additional asset acquisitions and disposals of existing assets."
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