REITs Collapsed Due to Inheritance Tax... What Is the Reason Behind Aegis Value REIT's Solo Recovery?

Aegis Value REIT is showing a steady stock price trend despite announcing a rights offering. This behavior deviates from the usual pattern where the stock price plummets sharply amid strong shareholder backlash when a listed REIT announces a rights offering.

According to the Korea Exchange on the 16th, Aegis Value REIT's closing price on that day was 4,905 KRW, marking only a 1.8% decline since the announcement on the 5th of a 66.9 billion KRW rights offering through a shareholder allocation followed by a general public offering of unsubscribed shares.

Since the announcement of the rights offering, Aegis Value REIT's stock price performance is considered to have held up well compared to the typical sharp declines experienced by listed REITs after disclosing rights offerings.

In fact, Shinhan Alpha REIT experienced an 18% drop in its stock price over a month following its rights offering plan announcement on March 2. The third-party allotment rights offering proposed by D&D Platform REIT was canceled last month on the 26th at an extraordinary shareholders' meeting due to shareholder opposition.

Typically, listed REITs pursue rights offerings to acquire new assets or repay existing loans to reduce financial costs. However, concerns over dilution of shares and the resulting decline in stock value often lead to shareholder disapproval.

The reasons behind Aegis Value REIT's stock price remaining steady despite the rights offering announcement include the justification for the offering and several positive factors related to its assets.

Through this rights offering, Aegis Value REIT plans to repay part of the 176 billion KRW bridge loan taken out to purchase Twin Tree Tower. The strategy is to alleviate the borrowing burden incurred from acquiring new assets and thereby enhance dividend stability.

Previous two rights offerings were also evaluated as beneficial to shareholder value, which raises expectations for this offering.

Researcher Lee Kyung-ja from Samsung Securities analyzed, “Aegis Value REIT completed third-party allotment rights offerings in 2021 and 2022 without discounts. As a result, the proportion of institutional investors increased, financial structure improved, and the foundation for asset acquisition was established, leading to a level-up in the stock price.”

She added, “In cases where growth potential is clear and the size of new shares is not excessive, stock prices have even risen during the rights offering period. Given the strong justification for capital expansion this time, the stock price impact during the rights offering period is expected to be mitigated, and attention should be paid to long-term growth potential.”

Aegis Value REIT is raising growth expectations by continuously improving its underlying assets. Twin Tree Tower and Taepyeong-ro Building have obtained LEED Platinum, the highest grade of global eco-friendly certification, solidifying their status as eco-friendly office REITs while expanding opportunities to secure loans at favorable rates such as green bonds. Additionally, Twin Tree Tower, which had a vacancy rate of 21% before acquisition, has been transformed into a building with 100% occupancy.

Among the underlying assets, the Isu Chemical Banpo headquarters, which had received relatively little attention, is increasing visibility of a stable tenant structure as Isu Chemical and Isu Specialty Chemical, tenants, have recently been recognized as key companies in growth industries. Isu Specialty Chemical, spun off from Isu Chemical, is the only domestic company capable of mass-producing lithium sulfide, a key material for all-solid-state batteries, attracting significant attention from the capital market.

Another asset, the North American data center portfolio, has over 70% of its tenants included in the so-called ‘Mega Cap 8’ (NVIDIA, Microsoft, Google, Meta, Apple, Tesla, Netflix, Amazon), benefiting from the generative AI boom initiated by ChatGPT.

An official from Aegis Asset Management stated, “The top priority principle of Aegis Value REIT’s rights offering is to improve shareholder value. We plan to reduce the loan-to-value ratio (LTV), which increased to 72% due to asset acquisitions for REIT growth, down to 68% through this offering, and based on that, prepare for further growth.”

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