Strengthening Trust Maintenance and REITs, Hantosin Expands Its Territory

[Asia Economy Reporter Inho Yoo]

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Korea Land Trust (Hantosin) is emerging as a strong player in urban renewal projects such as reconstruction and redevelopment. Building on its core trust business, it is expanding its scope into urban renewal projects, enhancing competitiveness, and positioning itself as a comprehensive real estate finance company.

This transformation by Hantosin is interpreted as part of diversifying its business areas to overcome the increasingly stringent regulations in the domestic real estate market and the global economic downturn.

This year, Hantosin will strengthen its efforts to apply the trust method to urban renewal projects. It will also expand the scope of its work in real estate asset management, including REITs. Additionally, it plans to solidify its position as a comprehensive real estate finance company by promoting collaboration with ICT companies aligned with the Fourth Industrial Revolution.

◆ Smooth path for trust-based urban renewal projects = The trust-based urban renewal project field, where Hantosin has successfully established itself, has been gaining momentum since the 2016 amendment of the Urban and Residential Environment Improvement Act.

Trust companies with solid financial power participate, showing outstanding advantages in terms of project stability and speed compared to the traditional construction company-centered approach, presenting the market with a next-generation business model.

This project method has advantages in various aspects such as time and fund management. When a trust company participates as the project implementer, there is no need to separately establish a promotion committee or association, which usually takes more than three years, significantly reducing the project duration. Under the Capital Markets Act, trust companies can manage funds transparently and thoroughly under the supervision of the Financial Supervisory Service, making it easier to gain residents' consent for the renewal projects.

Hantosin has achieved excellent results in major urban renewal projects nationwide over the past few years. The company was designated as the agent for the large-scale Busan Seo-Geumsa 5 District redevelopment project, consisting of 4,564 households. Recently, it also attracted attention by taking charge of the Incheon Gyeongdong District urban environment renewal project, which had been stagnant for 10 years since its designation as a renewal zone.

The Gyeongdong District urban environment renewal project was designated as a renewal zone in 2009 but showed little progress for about 10 years due to issues such as project feasibility. After Hantosin's involvement, the project accelerated with the selection of a construction company and other developments, gaining momentum.

The industry evaluates that Hantosin's leadership in the trust-based urban renewal project market is due to the high trust accumulated from its past achievements. In 2018, Hantosin successfully completed the sale of the Daejeon Yongun Jugong Apartment reconstruction project, 'e-Pyeonhansesang Daejeon Ecoforet.' Although the site had seen no progress for years due to funding issues, the project resumed in earnest after Hantosin took over, achieving a full sell-out in a short period.

Based on this performance, Hantosin has consecutively participated in projects such as Incheon Hakik 1 Redevelopment, Seoul Singil 10 District Reconstruction, Seoul Heukseok 11 District Redevelopment, and Busan Beomil 3 District urban environment renewal project. To date, Hantosin has been designated as the agent for urban renewal projects covering about 15,700 households across 12 sites nationwide, leading the trust industry in development scale.

◆ Expanding into REITs and Fourth Industrial Revolution sectors = Hantosin is also standing out in the REIT business, which is currently receiving the hottest attention in the domestic real estate market. Since establishing a corporate restructuring REIT in 2002, it has grown to surpass 1 trillion KRW in cumulative assets under management (including planned development projects) as of 2019.

In particular, Hantosin has entered public-supported private rental housing competitive projects by forming strategic consortiums with construction companies, being selected as the preferred negotiator for projects such as Paju Unjeong and Suwon Godeung. Since it participates with a long-term perspective considering operation and sale from the development stage, stable returns are expected.

Hantosin has also ventured into businesses related to the Fourth Industrial Revolution era. Collaborating with ICT companies such as blockchain and shared office providers, it is actively promoting the introduction of real estate services based on advanced industries. Through this, Hantosin shares information on site discovery, project feasibility review, investment participation, financial advisory, and overall development projects. It is expanding its business scope from the traditional sales-focused model to include rental and operation business models.

Hantosin will also launch a 'Real Estate Trust Beneficiary Certificate Distribution Platform Service' utilizing blockchain technology. Conducted through a business agreement with 'Casa Korea,' this service uses blockchain technology to publicly offer real estate trust beneficiary certificates as digital securities. It includes building and operating a platform where investors can easily trade these securities.

If Hantosin issues real estate trust-based beneficiary certificates, it will be the first case of a real estate trust company issuing beneficiary certificates since the 2012 amendment of the Trust Act. Until now, small and medium-sized commercial real estate investments were mainly operated by institutional investors and private equity funds, but this will allow individual investors to participate directly. The industry expects this to become a new growth axis in the real estate finance market.

Choi Yoon-sung, CEO of Hantosin, said, "We will further demonstrate the know-how and project execution capabilities we have accumulated as the nation's top trust company in 2020. In the new year, we will do our best to grow into a comprehensive real estate company covering all real estate businesses from development agency for urban renewal projects to REIT operation and financial markets."

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