Seoul to Launch Seoul Companion REITs Allowing Citizens to Invest and Share Profits... Targeting 6% Dividends

Pilot Projects Considered for Yongsan International Business District B9 and Seocho Fire Academy
Citizen Subscription to Account for Around 30% of Capital

The Seoul Metropolitan Government announced on April 22 that it will introduce the "Seoul Companion REITs (Real Estate Investment Trusts·Regional Win-Win REITs)," a scheme in which citizens participate in public development projects and share profits.

The Seoul Companion REITs structure is designed so that the public sector leads the project during the high-risk "development phase" to eliminate business uncertainty, and then, once the project is completed and profits are stabilized in the "operation phase," citizens can participate as shareholders and share in the profits.

REITs are real estate investment companies that pool funds from many investors, invest in real estate, and distribute profits. Since the system was first introduced in 2001, private sector REITs have typically operated office or retail properties to distribute dividends, or have been used to securitize corporate assets. With amendments to the Real Estate Investment Company Act in November last year, Regional Win-Win REITs and similar schemes were introduced, addressing previous disadvantages in applying REITs during the development stage and establishing a legal foundation for local residents to participate in projects.

The Seoul Companion REITs will focus on public participation projects in which the Seoul Housing & Communities Corporation (SH), the Seoul Metropolitan Government, and other public entities hold at least a 51% stake. The annual dividend target is set at a minimum of 6%. The amount available for citizen subscription will be around 30% of the REITs’ capital, and the scope of the public offering area will be set based on the size and characteristics of each project.

The city is currently considering pilot applications for the B9 site of the Yongsan International Business District public-led mixed-use development, and the private investment project on the Yangjae-dong Fire Academy site in Seocho-gu.

The B9 site of the Yongsan International Business District is an area within an urban development project jointly implemented by KORAIL and SH, where SH is considering direct development. A mixed-use development project is being pursued, including officetels, business, and commercial facilities in buildings up to approximately 60 stories high, with a total project value of 2.5 trillion won.

Starting next month, the city plans to establish detailed financial structure designs and strategies to attract REITs investors, to begin recruiting private investors for full-scale project implementation in 2027, and to target a citizen public offering when construction is completed in 2033.

On the Fire Academy site, the project aims to create public senior housing as well as cultural, leisure, and community facilities. This is being pursued as a "site-specific public offering private investment project (BTO)," with a private bidder currently working to specify the project plan. The city aims to receive the initial private investment proposal by as early as the end of this year, review the private investment plan in 2027, and begin construction in 2028. A citizen public offering is expected to be possible after the facility is completed, which is anticipated in 2033.

This year, the city will establish detailed business plans for each pilot project applying the Seoul Companion REITs, as well as set detailed operational criteria for the scope and scale of the citizen public offering and investor protection mechanisms. Going forward, the city will also consider ways to encourage application of the scheme to private developments.

Kim Yonghak, Director of Future Space Planning at the Seoul Metropolitan Government, stated, "The Seoul Companion REITs is a new attempt to share development profits not just with a select few, but with citizens, expanding Seoul's slogan of 'walking with the underprivileged' into all areas of urban development. We will open the door to a 'Seoul-style win-win development' where citizens invest, the city grows, and profits are returned to the community."

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