[Click eStock] "SK REITs, Selling Gas Stations and Incorporating SK-C Tower... Dividend Increase"

On the 10th, Samsung Securities forecasted that dividends would increase as SK REITs, SK Group's real estate investment company, decided to incorporate the SK-C Tower located in Chungmuro, Seoul.

SK REITs owns the SK building in Seorin-dong, Jongno-gu, Seoul. Photo by Jinhyung Kang aymsdream@

The SK-C Tower is a medium-sized office building with a total floor area of 6,500 pyeong, recently remodeled. Affiliates such as SKC (59%) and SK C&C (21%) are expected to lease and use the building. The total investment cost is 218 billion KRW.

Lee Kyung-ja, a researcher at Samsung Securities, explained, "Once the building purchase is completed, SK REITs' assets under management (AUM) will increase from 4.2 trillion KRW to 4.4 trillion KRW on a book value basis, and from 4.7 trillion KRW to 4.9 trillion KRW on a fair value basis."

The researcher analyzed, "The capitalization rate (cap rate) of SK-C Tower is 5.7%, which will raise the overall cap rate of the REITs' incorporated assets from 4.91% to 4.97%." The cap rate refers to the annual return on real estate assets when purchased solely with cash (equity) without borrowing.

Accordingly, "Assuming all convertible bonds (CB) issued by SK REITs are converted into shares, the annual dividend per share (DPS) is expected to increase by about 9 KRW starting from the second half of next year," he predicted.

He evaluated, "As SK REITs' ability to raise funds improves, such as through low-interest corporate bond issuance, DPS improvement due to reduced interest expenses can also be expected," adding, "With timely portfolio replacement and the use of low-cost leverage, the upward trend in DPS continues annually."