Establishment of Development Anchor REITs Worth Approximately 800 Billion KRW
Proposal Submissions Open Until September; Final Selection Expected in November
Korea Land and Housing Corporation (LH) announced on the 31st that it has begun accepting applications from asset management companies (AMCs) to participate in the 'PF Advancement Priming Development Anchor REITs Project'.
The 'PF Advancement Priming Development Anchor REITs Project' is a program in which a development anchor REIT, jointly funded by LH and the private sector, selects high-quality projects at the bridge loan (pre-construction short-term loan) stage for investment, and then recoups the funds when the main PF (project financing) is executed. This initiative was established to support the stability of the real estate development market and revitalize the construction sector by having the public sector make advance investments through anchor REITs in outstanding projects that face difficulties in securing initial project financing.
The anchor REIT will be established at a scale of approximately 800 billion KRW (with at least two REITs), combining a 200 billion KRW investment from LH, private sector funding, and HUG-guaranteed corporate bond borrowing. The maximum investment per project is 100 billion KRW (up to 50% of the land acquisition cost). The investment is recovered when the main PF is executed.
Eligible investment targets are projects that meet the criteria set by the Ministry of Land, Infrastructure and Transport and LH, including business feasibility, land acquisition status, permit potential, and capital stability. Final selections will be made through the REIT’s own investment review committee and other processes.
'PF Advanced Catalyst Development Anchor REIT' Business Structure Diagram. The development anchor REIT, funded by LH and the private sector, invests in development projects facing difficulties at the bridge loan stage and recovers funds upon conversion to the main PF. Provided by LH
LH plans to give preference to projects that not only ensure business stability but also contribute to national growth engines, such as the supply of rental housing and the establishment of artificial intelligence (AI) data centers. Additional preferences will be given to cases where local governments or regional public corporations participate or express a desire to invest, in order to promote the development of regional hubs in provincial areas.
The selection process for the development anchor REIT AMC will include the following steps: announcement of the selection (starting now), application submission (by September 30), review and evaluation (October to November), and the announcement of the preferred negotiation partner and final selection (October to November).
The selected AMC will be responsible for the overall operation of the REIT, including investor recruitment, project identification, operation of the investment review committee, and fund execution and management, in order to achieve policy objectives such as the advancement of real estate PF.
Applicant companies must be qualified to operate a real estate investment company under the Real Estate Investment Company Act, currently manage collective real estate development investments (REITs or funds) of at least 100 billion KRW, have at least two key management personnel participating, and meet the criteria for securing investors.
Applicant companies must propose a total investment commitment by attracting private investors (exceeding 50% of the total investment commitment), and also present an operation strategy and investment plan that take into account the characteristics of the funds and the REIT’s business objectives. At least one project that meets the investment target selection criteria must also be presented when applying.
Further details are available on the LH website.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
