Aegis Value REIT, Korea's First Data Center Holder... Maximizing Shareholder Value

Acquisition of US Data Center Portfolio Income Securities and Bundang Data Center Equity
Data Centers Transition from Facilities to Investment Real Estate... "Large REITs Growth Potential↑"

Taepyeong-ro Building, Jung-gu, Seoul, the underlying asset of Aegis Value REITs (Source: Aegis Value REITs website)

[Asia Economy Reporter Minwoo Lee] Aegis Value REITs is incorporating a data center for the first time among domestic REITs (Real Estate Investment Trusts). This move reflects a new growth engine by viewing data centers not merely as facilities but as investment real estate.

On the 4th, Samsung Securities newly issued a 'Buy' rating and a target price of 6,500 KRW for Aegis Value REITs, citing this background. The previous trading day's closing price was 5,530 KRW.

Earlier, on the 31st of last month, Aegis Value REITs applied to the Ministry of Land, Infrastructure and Transport for a subsidiary REIT business license to incorporate a data center and a logistics center in Icheon, Gyeonggi Province. This is the first data center incorporation in the history of domestic REITs. They plan to operate by incorporating 5% of the revenue securities of a portfolio of 12 North American data centers and 60% equity in the Bundang Hostway data center. Previously, when the underlying asset was only one building, the Taepyeong-ro Building in Jung-gu, Seoul, Aegis Value REITs announced in May that it would incorporate three logistics centers and two data centers by the first half of next year.

The total investment amount (based on assets) for the four projects is estimated at 70 billion KRW, and an additional loan of 45 billion KRW is possible due to the increased collateral value of the Taepyeong-ro Building. Researcher Kyungja Lee of Samsung Securities explained, "Based on assets that have been approved or are in progress (the North American portfolio is based on the value of revenue securities), Aegis Value REITs' asset size will double from the existing 300 billion KRW to about 600 billion KRW," adding, "This case suggests that growth strategies become even more important after a REIT is listed."

There is an analysis that data centers are establishing themselves not as mere facilities but as investment real estate. Currently, the dividend yield of major U.S. data center REITs is only 1-3%, because their dividend payout ratio is less than 50% to allow for additional investments. Researcher Lee said, "The North American portfolio that Aegis Value REITs will invest in is expected to have a dividend yield of 7%, with the dividend payout ratio maximized, and the main tenants are large cloud companies such as Microsoft (MS), ensuring high tenant stability," adding, "The dividend yield of the domestic Hostway data center also approaches the 6% range, and they plan to distribute profits to shareholders through sale after about five years of operation."

Aegis Value REITs plans to compose 70% of its assets as core assets such as prime offices and 30% as growth assets. Recently, all REITs have been facing difficulties in acquiring assets due to rising real estate prices. Aegis Value REITs is actively employing an 'alpha strategy' including pre-acquisition, development, and sale of assets, as seen in its pre-purchase of the Icheon logistics center, which will be completed next month. Researcher Lee diagnosed, "The purchase price of the underlying asset, the Taepyeong-ro Building, was 302.5 billion KRW, but the appraisal value increased by 13% last year and has recently risen by about 5% more," adding, "The recent price-to-net asset value ratio (P/NAV) is undervalued at 0.8 times, but with many growth assets incorporated, it has abundant potential to grow into a large REIT."

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