Kim Dong-jung, Head of NH Nonghyup REITs Management, "REITs Products to Meet Various Needs Will Emerge"

Published 21 May.2021 08:31(KST)

2021 Asia Economy IPR Forum
REITs Allow Real Estate Investment for the Price of a Cup of Coffee
Medium-Risk Medium-Return Products... Growing Interest in Publicly Listed REITs

[Asia Economy Reporter Hyungsoo Park] Kim Dongjung, Head of NH Nonghyup REITs Management, attended the '2021 Asia Economy IPR Forum' held online on the 20th and stated, "The yield of listed REITs is higher compared to advanced countries including the United States," and predicted, "The number of listed REITs will increase to 90 by 2030, with assets reaching 128 trillion KRW."

Real Estate Investment Trusts (REITs) are indirect real estate investment vehicles that collect funds from investors under the Real Estate Investment Company Act, invest and manage real estate and real estate-related securities, and return profits to investors. REITs were first introduced in the United States in 1960 and were introduced in Korea in 2001 after the 1997 foreign exchange crisis to promote corporate restructuring through the securitization of corporate-owned real estate. The investment properties of REITs have gradually shifted from corporate restructuring real estate to general real estate. The REITs market was previously centered on private REITs, but as many public listed REITs have emerged, the investor base has expanded from institutional investors to individual investors, leading to growth.

The domestic REITs industry has steadily grown since the enactment of the Real Estate Investment Company Act in 2001. As of the end of March 2021, the number of established REITs was 291, with total assets amounting to 63.8 trillion KRW. Interest in alternative investments including real estate is increasing, and with government deregulation and activation policies related to REITs, the REITs industry is expected to continue growing steadily.

Although the scale of public listed REITs is relatively small compared to private REITs, considering that they allow investment with small amounts of capital and offer liquidity, the scale of public listed REITs is expected to continue expanding.

On the 20th, at the Asia Economy building in Jung-gu, Seoul, Kim Dong-jung, Deputy Manager of NH Nonghyup REITs Management, gave a lecture titled "REITs, Real Estate Investment for the Price of a Cup of Coffee" during the '2021 Asia Economy IPR Forum' held via online live broadcast. Photo by Kim Hyun-min kimhyun81@

Kim said, "In the U.S., the real estate sectors that REITs invest in are diverse, including office, industrial, hotel, residence, and infrastructure," and introduced, "In contrast, in Korea, residential accounts for 58%, with limited sectors such as office, retail, and logistics warehouses." He added, "REITs are representative mid-risk, mid-return products that combine profitability and stability," and "In the future, investors will be able to choose from various REIT products that suit their individual preferences."

The outlook for Seoul office space is one of the important variables determining the stability and profitability of REITs. Kim analyzed, "Office prices, like general goods, are determined by supply and demand," and "The total office space in Seoul is expected to increase from 12.77 million pyeong last year to 13.65 million pyeong by 2026."

He added, "Looking at the vacancy rate status, it was below 5% before 2010," and "Since then, office supply has increased in Seoul's Sangam, Magok, Munjeong districts, as well as in the Pangyo and Bundang areas, causing the vacancy rate to rise." However, Kim noted, "Seoul office prices show an upward trend," and "Real estate prices have risen sharply in the past 2-3 years amid a trend of declining interest rates."

When investing in real estate, one can buy property directly or use listed REITs. Direct investment requires substantial capital and involves significant tax burdens such as capital gains tax and property tax. In contrast, listed REITs allow investment with small amounts and enable liquidity at desired times.

NH Nonghyup REITs Management is promoting the listing of ‘NH All One REIT’. The lead underwriter is Korea Investment & Securities. The All One REIT’s assets under management (AUM) are approximately 525 billion KRW. The portfolio consists of offices such as Bundang Square, A-One Dangsan, A-One Ingye, and Doji Logistics Center. The vacancy rate of A-One Ingye decreased from 18.95% at the time of asset purchase in February last year to 5.90% at the end of March this year.

Doji Logistics Center is used by Dongwon Loex and Hanaro TNS. Dongwon Loex handles volumes in the Honam region through a combined cold and ambient warehouse. Hanaro TNS handles Samsung Electronics home appliances at the Doji Logistics Center.