Judging Listed REITs as Undervalued:
Supplying Liquidity Through On-Exchange Trading
Supporting Stock Price Downside and Boosting Market Activity
On August 27, Koramco REITs Management & Trust announced that it has initiated the public bidding process to reselect the delegated manager for on-exchange trading of the Housing and Urban Fund Anchor REIT.
The Anchor REIT is Korea's first blind fund-type REIT, established in 2020 by the Ministry of Land, Infrastructure and Transport through the Housing and Urban Fund, with a total size of 465 billion won. It was created to address the chronic issue of low liquidity in the listed REITs market. Initially, the fund focused on pre-IPO equity investments in listed REITs, but later shifted its strategy, judging that on-exchange trading would be more effective in stabilizing the market.
Koramco REITs Management & Trust previously recruited a delegated manager for on-exchange trading to supply liquidity to the listed REITs market. However, the original plan was scrapped due to the high selection requirements and difficulties in attracting co-investors for the preferred negotiator.
Recently, as the KOSPI surpassed the 3,200 mark and the likelihood of US interest rate cuts increased, Koramco REITs Management & Trust determined that investment conditions for listed REITs had become favorable, with their stocks entering an undervalued range. This prompted the company to launch a new selection process for the delegated manager.
Koramco REITs Management & Trust formalized its fund formation plan through an official announcement for the selection of an on-exchange trading delegated manager. According to the announcement, the fund will be established with a minimum size of 30 billion won. The participation requirements for asset management companies have been eased compared to the beginning of the year. The minimum assets under management (AUM) requirement has been lowered from 1 trillion won to 300 billion won, and the minimum co-investor fundraising amount has been reduced from 12 billion won to 8 billion won, thereby expanding the pool of potential delegated managers.
Koramco aims to complete the selection of the manager next month, with the goal of establishing the fund and commencing on-exchange trading by November this year.
Separately from the selection of the delegated manager, Anchor REIT began on-exchange purchases of listed REITs through its own management last month. The plan is to support the downside of listed REITs by directly supplying liquidity, while also activating trading through the delegated manager.
Koramco provides each asset management company with evaluation criteria for the REITs targeted by Anchor REIT, thereby promoting market advancement. The company emphasizes that, from the perspective of listed stock investment rather than simple indirect real estate investment, each listed REIT should enhance its own investment appeal through growth strategies and differentiation, financial structure stabilization, and shareholder-friendly management.
The domestic listed REITs market has grown to 25 companies since 2018, but most listed REITs are still trading below their initial public offering prices. Industry insiders expect that the moves by Anchor REIT will revitalize the long-stagnant listed REITs market and have a positive impact on improving the overall industry structure.
An industry official commented, "Anchor REIT's recent efforts to expand investment in the securities market could inject vitality into the long-depressed listed REITs market and have a positive effect on the overall industry structure."
Detailed information regarding the recruitment of delegated managers can be found on the websites of the Korea Financial Investment Association, the Korea REITs Association, and Koramco REITs Management & Trust.
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