LH Launches 'Housing Development Public REIT'... 6-9% Dividend Yield with Public Shareholder Participation

Public Offering of Housing Development REITs for the Public
This Year’s Target: Incheon Geomdan and Bucheon Goean Residential Sites, 2-3 Housing Site Projects Planned Annually

Housing Development Public Offering REIT Business Structure / Provided by LH.

[Asia Economy Reporter Jo Gang-wook] Korea Land and Housing Corporation (LH) announced on the 14th that it had announced a public offering for private sector operators of the ‘Housing Development Public REITs,’ a project to share development profits generated from housing sales with the public.

This public offering is the first project implemented under the ‘Improvement Plan for the Supply System of Apartment Sites’ announced by the Ministry of Land, Infrastructure and Transport last November to improve the side effects of the apartment site supply method centered on a lottery system, such as swarm bidding using paper companies by some construction firms, and to share the profits of development projects.

The ‘Housing Development Public REITs’ project expands stock public offerings in existing housing development REITs to share development profits with the public. A private sector operator, consisting of a consortium of construction and financial companies, establishes a REIT and purchases LH apartment sites through the REIT to build and sell housing, maintaining the basic business structure of housing development REITs. However, the stock public offering ratio to the public is expanded during the REIT’s capital raising process, allowing the public to participate as shareholders in the REIT project and receive dividends. LH is responsible for selecting private operators and supplying land, while private operators handle REIT establishment, fundraising, stock public offerings, design, construction, and sales.

When evaluating proposals from private operators, LH plans to increase the evaluation weight on the ratio of public offering shares to encourage the expansion of stock public offerings. To this end, LH proposed a public offering plan that increases the REIT’s capital from 6-10% of the total project cost to 10-15%, expands the public offering ratio from 30% of the capital to up to 40%, and raises the usual 5.2% dividend yield to 6-9%.

The higher the proposed capital ratio, public offering ratio, and dividend yield, the higher the score awarded in those categories. The evaluation weight for the stock public offering plan was significantly increased from 20 points to 380 points, including assessing the ‘Equal Allocation Ratio of Public Offering Shares (70)’ to allow any citizen to participate as a shareholder.

The pilot project sites for the Housing Development Public REITs are apartment sites in Incheon Geomdan AB21-1 Block and Bucheon Goean B2 Block, which will be offered as a package. The Incheon Geomdan district is conveniently connected to Olympic-daero, Airport Expressway, and Airport Railroad, with high demand for apartments within the district and excellent access to schools and commercial facilities on the supply sites. The Bucheon Goean district adjoins Seoul Hang-dong district and boasts excellent transportation access with nearby Subway Line 1 (Yeokgok Station) and Line 7 (Onsu Station). A residential town is being developed near the supply sites, providing favorable living conditions.

The public offering will accept letters of intent from August 28 to 30, receive project applications on September 6, and select a preferred negotiation partner within September. Private operators must apply as a consortium consisting of up to two financial companies and two construction companies each. Detailed information on the public offering conditions can be found on the LH website. The preferred negotiation partner will be selected in September this year, the REIT will be established in October, stock public offering, groundbreaking, and sales will occur in July next year, and the REIT will be liquidated in January 2026.

LH has been working with the Ministry of Land, Infrastructure and Transport to promote this project by revising related laws and establishing the business model. The Ministry revised relevant laws such as the ‘Special Act on Public Housing’ to allow LH housing sites to be supplied to stock public offering-type REITs. LH reviewed legal, accounting, and other issues related to project promotion, established the business model, and managed the project promotion, including selecting final candidate sites.

LH expects the Housing Development Public REITs project to △expand indirect real estate investment opportunities for the public △resolve side effects of the apartment site supply method △ensure housing quality. Unlike direct real estate investment requiring large funds, anyone can acquire shares issued by the REIT with a small amount and receive stable dividend income. It also addresses issues such as swarm bidding, where private construction companies use affiliates like paper companies to bid unfairly on LH apartment sites, and induces high-quality housing construction through design evaluations reflecting the latest trends. LH plans to conduct the Housing Development Public REITs project for two or more housing sites annually.

An LH official said, "The housing development public offering project is a meaningful project that provides the public with opportunities for indirect real estate investment, and we expect many construction and financial companies to participate due to the high popularity of apartment sites in the metropolitan area."

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