[Practical Finance] Growing REITs Market... Popularity of Platforms for Buying and Selling Building Shares Increasing

[Asia Economy Reporter Ryu Tae-min] As the real estate market gains momentum, investors' interest in indirect real estate investment products such as REITs is also growing. In particular, investment platforms that allow buying and selling building shares like stocks are gaining popularity as well.

According to the Ministry of Land, Infrastructure and Transport on the 10th, as of the end of September, the number of approved REITs in Korea (excluding listed REITs) was 302, with total assets amounting to 70.7 trillion KRW. Compared to 50 REITs with assets of 7.6 trillion KRW in 2010, this represents a tenfold increase in scale over 11 years.

By type, ‘Entrusted Management REITs,’ which delegate asset investment and management to specialized asset management companies, account for 67 trillion KRW, or 94.78% of total assets. ‘CR REITs,’ which operate by purchasing real estate for corporate restructuring and then re-leasing it to generate income, make up 4.47% (3.2 trillion KRW), and ‘Self-Managed REITs,’ which have full-time employees such as asset management professionals who directly invest and manage assets like real estate, account for 0.75% (500 billion KRW).

REITs offer excellent stability and higher returns compared to other major financial products. According to the Bank of Korea’s Economic Statistics System, the return on managed REITs was 8.33% last year, boosted by the rising real estate market. Among REITs, listed REITs freely traded on the stock market showed a dividend yield of 7.13%. During the same period, government bonds yielded 0.99%, corporate bonds 2.13%, and deposit bank interest rates 1.05%, making REIT returns notably higher.

Real estate digital revenue securities trading platform Kasa, view at the time of listing at Yeoksam Korea Technology Center. (Photo by Kasa)

As indirect real estate investment products gain popularity, interest in indirect real estate investment platforms has also increased recently. The financial service ‘Kasa’ is a representative example. ‘Kasa’ operates by listing buildings on its platform similarly to how companies are listed on a stock exchange. Since asset values reach tens or hundreds of billions of KRW, buildings that were previously exclusive investment assets for high-net-worth individuals can now be purchased by ordinary individuals through ‘Digital Asset-Backed Securities (DABS),’ which represent shares of the building in digital form, allowing investors to receive rental income benefits proportional to their shareholding just like building owners.

Investors can receive quarterly rental income dividends according to their DABS holdings. The securities have no separate lock-up period or redemption restrictions, allowing trading on the platform exchange at any time to seek capital gains. Above all, the advantages include the ability to invest freely in multiple expensive buildings with small amounts and no management obligations since the entire building is not purchased. However, Kasa currently only has three buildings available for investment, and the total issuance scale of asset-backed securities is limited to 500 billion KRW, so the investable buildings are likely to remain medium to small-sized. For general investors, the annual investment limit is 20 million KRW, or 40 million KRW if annual earned income or business income exceeds 100 million KRW.

There are also risks. If the invested building fails to find tenants and becomes vacant, dividends will not be paid. This can lead to a decline in building value and result in investment losses, so caution is necessary before investing. The biggest advantage, ‘easy buying and selling like stocks,’ also requires verification. While there is great expectation for providing investors with diverse investment methods, a certain level of demand and participation is necessary to achieve this.

Meanwhile, Kasa launched its first product, ‘Yeoksam Londonville’ in Seoul, through a public offering in November last year. It then listed ‘Seocho Jiwol Tower’ in Seoul as the second product in July this year, and in September, it listed ‘Yeoksam Korea Technology Center’ in Seoul as the third product, which is currently on sale.

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