Overview

What is a REITs?

REITs (Real Estate Investment Trusts) mean a real estate investment company operating under business license(registration) from the Minister of Land, Infrastructure, and Transport for the purpose of investing in real estate with the collected funds from multiple investors, and providing the operating and sales profit to investors in the form of dividends or sales proceeds distribution.

REITs offer chances for investors to invest in real estate through capital market by connecting capital market and real estate market.

2007 PangyoSD2

Real estate investment
through capital market /
financial investment product
through securitization of real estate
  • By connecting capital market with diverse investors with real estate market, individual investors can invest in large scale real estate with small capital.
  • Efficiency and transparency of real estate market are improved by spreading and sharing risk from investing in large scale real estate.
  • It is quality alternative investment vehicle that investors can expect stable income in the era of aging society and low interest rate.
그래프

Strengths of REITs Investment

Strong Profitability

A higher yield vis-a-vis investment risks is expected, driven by real estate investment based on precise market reviews and analyses. An additional yield is possible with higher values in real estate through professional and systematic asset management such as remodeling.

Solid Stability

As investments are in the form of real estate, risks of investment value are minimized even amid inflation. In the worst case scenario, the loss of investment principal can be minimized by disposing of real estate holdings, and a stable shareholder return is possible through rational investment analyses on lease fees, vacancy rates and maintenance fees.

Convenient Liquidity

As for listed REITs, stocks held can be converted into cash, if necessary.

Tax breaks

Income tax is almost nil once over 90% of the income available for dividends are distributed(Article 51-2 of the Income Tax Act)
Progressive taxation (the maximum tax rate of 0.7%) is applied for property taxes and comprehensive real estate taxes for land upon direct investment. However, the land property tax of 0.2% is singularly applied upon REITs-based investments, and excluded from the list of investments subject to comprehensive real estate taxation.
(Local Tax Article 106 and Enforcement Ordinance Article 102)

Expansion of Investment Opportunities

Investment opportunities in large-scale real estate projects are available even with small-scale funds including those of personal investors.

Company Building Purchase

The status comparable to a building owner can be obtained and there are financial effects from investment and renting. Asset operation's efficiency can be maximized through knowhow utilization of expert asset management knowhow of AMC.

2007 KOCREF No.11 STX Namsan Tower

Strengths

Status comparable to a building owner
  • Building name can be changed
  • External board attachment is possible (Naming Right)
  • Through REITs appointment of board of directors, decision making participation regarding major matters of building operation is possible.
  • When there is a demand for renting buildings in the future, prior and active reponse is possible through close consultation.
Financial effect from investment and renting
  • Small scale investment satisfies the needs of making a company building (investment of about 10% of a total expense)
  • Enjoying operation profit and asset value increase from rental cos as shareholders
  • Reducing rental cost in reasonable renting condition compared with markets
  • Making foundation for a company building by offering a claim for preemption
Asset management knowhow utilization
  • Asset management risk minimization through expertise and experience of an asset management company whch performs asset management only
  • Business competitive edge enhancement through environment creation for companies owning real estate to focus on their main business

Cases of Company Building Purchase through Utilization of REITs

  • 코크렙 4호
    KOCREF No.4

    YTN Tower |

    liquidation completed

  • 코크렙 11호
    KOCREF No.11

    STX Namsan tower |

    liquidation completed

  • 코크렙 청진
    KOCREF Cheongjin

    Grand Seoul |

    in operation

Liquidation of Holding Asset

Fixed asset on financial statement is book-off, and operation asset securing and financial index improvement are possible. In addition, through equity contribution of REITs, the status similar to a building owner is acquired, through provision of preemption option to sellers asset repurchase at the expiration of REITs is possible.

2005 KOCREF No.6 Newcore Outlet Yatap

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Cases of Holding Asset Liquidation through Utilization of REITs

  • 코크렙 3호
    KOCREF No.3

    Hanhwa securities building |

    liquidation completed

  • 코크렙 6호
    KOCREF No.6

    New Core outlet |

    in operation

  • 코크렙 38호
    KOCREF No.38

    Korea National Oil company building |

    in operation

Development Project

Development REITs performs the role of SPC as a developer and borrower in name.
In addition, regarding he entire or partial projects in construction by a developer or a constructor, on the condition of consruction completion, selling to REITs is possible and in this case the project cost can be secured with advance buying payment.

2013 KOCREF Gwanggyo lotte outlet

Strengths

Directly developed through REITs
  • Development REITs performs the role of SPC as a developer and borrower in name
  • Asset operating company performs businesses such as prject plan establishment and funding and the role of CEO of REITs of development as a corporate body director
Land contribution in kind and holders joint project
  • The exising land owner or company's holding real estate in invested in REITs and REITs directly develops based on this.
Prior purchase on the condition of construction completion
  • Regarding he entire or partial projects in construction by a developer or a constructor, on the condition of consruction completion, selling to REITs is possible
  • A developer of a constructor can secure project cost, reduce financial cost, and performs stable projects.

Case of Development Project Utilizing REITs

  • 판교 SD-2 PFV
    Pangyo SD-2 PFV

    Pangyo H'square

  • 코크렙 광교
    KOCREF Gwanggyo

    Lotte outlet Gwanggyo

  • 코크렙 벽은
    KOCREF Byuken

    Seocho Shillastay

REITs Kinds and Characeristics

Type of REITs

Corporate Restructuring (CR-REITs)
Company Form Paper Company
(Paper company)
Investments Real estate for corporate restructuring
Category Asset's investment and management is consigned to a specialized asset management company (Koramco REITs & Trust)
Consigned-Managment REITs
Company Form Paper Company
(Paper company)
Investments Real estate
Category Asset's investment and management is consigned to a specialized asset management company (Koramco REITs & Trust)
Self-managed REITs
Company Form Ordinary company
Investments Real estate
Category REITs whereby overall asset management such as asset Investment & management is conducted by a specialized asset management workforce REITs characteristics by kind

Classification

Consigned-Managment REITs
Investments Real estate
Company Type Paper Company (no full-time personnel)
The lowest capital KRW 5 Billion
Distribution of Shares Within 50% per person
Public Offering Capital of 30% or more
Going Public Immediately right after requirements are met
Asset Composition · Real estate and real estate relate securities : 80% or more

· Real estate : 70% or more
Development Project According to decision of general assembly of shareholders up to 100% investment out of total capital is possible.
Corporate Restructuring REITs
Investments Real estate for corporate restructuring
Company Type Paper Company (no full-time personnel)
The lowest capital KRW 5 Billion
Distribution of Shares No limit
Public Offering No obligation (private equity possible)
Going Public No obligation
Asset Composition Real estate : 70% or more
Development Project According to decision of general assembly of shareholders up to 100% investment out of total capital is possible.
Self-managed REITs
Investments Real estate
Company Type ordinary company
(having full-time personnel)
The lowest capital KRW 7 Billion
Distribution of Shares Within 50% per person
Public Offering Capital of 30% or more
Going Public Immediately right after requirements are met
Asset Composition · Real estate and real estate relate securities : 80% or more

· Real estate : 70% or more
Development Project According to decision of general assembly of shareholders up to 100% investment out of total capital is possible.