[Click eStock] "ESR Kendall Square REITs, Korea's First Logistics Center-Based Listed REITs"

[Asia Economy Reporter Eunmo Koo] A REITs (Real Estate Investment Trust) based on logistics centers, a commercial real estate product that has attracted attention in the market over the past few years, is scheduled to be listed. It is evaluated as being faithful to the basics of high business sustainability and stable dividends.

ESR Kendall Square REIT is the first logistics center-based REIT in Korea. The sponsor, ESR Kendall Square, is a subsidiary within the ESR Group, which specializes in the development and operation of real estate, particularly logistics centers. At the time of the initial public offering (IPO), the underlying assets consist of 10 logistics centers mainly in the metropolitan area, and one additional logistics center in Anseong is planned to be incorporated before June next year. The total asset size of the 11 logistics centers is 1.4 trillion KRW. Based on the public offering price of 5,000 KRW, the expected market capitalization is 716.3 billion KRW, and the planned public offering amount is 357.3 billion KRW.

ESR Kendall Square REIT is evaluated as having high business sustainability. On the 26th, Yoonho Cho, a researcher at DB Financial Investment, explained in a report, “Since the sponsor ESR Group’s core business is the development and operation of logistics centers, it differs from other REITs that aim for asset price appreciation and capital gains at some point,” adding, “In such cases, there can be contrasting evaluations: while dividend stability is very high, it is difficult to expect the REIT’s stock price to rise due to asset value appreciation.”

In that regard, it is evaluated as being most faithful to the basic principle of REITs, which is stable dividends. Researcher Cho explained, “Due to the nature of logistics centers, location is important, and most are located in key areas such as the metropolitan area, with a lease rate reaching 98% based on contracted area. The REIT’s debt ratio is relatively low at 45.6%, and even if additional assets are incorporated with debt next year, it will only be 52.1%, resulting in a dividend yield increase from 5.4% in the first year to 5.7% in the second year.” He also pointed out, “Since the sponsor’s main business is logistics center development and operation, the business sustainability through the underlying assets is very high.”

However, he noted, “80.6% of the tenants of the 11 logistics centers are composed of e-commerce companies and third-party logistics companies, which are core to the recent logistics industry,” adding, “A specific e-commerce company has a relatively high lease ratio, which can be seen as a double-edged sword in terms of stability.”

This content was produced with the assistance of AI translation services.