Overview

What is a Trust?

The act of creating a trust is the consigning of property (entrusted property) by those who hold the property rights (consigners) such as cash or real estate to consignees, and at the same time, to manage and dispose of the property for themselves or others (beneficiaries) according to specific purposes (trust purposes).

Features of a Trust

  • The biggest feature is the transfer of property rights (complete ownership transfer both internally and officially) from consignors to consignees.
  • The property, in fact, is consigned to beneficiaries in economic terms although it remains internally and officially consigned to the consignees.
  • Entrusted property stands independent from consignors and consignees.

What is a Real Estate Trust?

  • A real estate trust is different from a cash trust in that the entrusted property is real estate or real estate-related rights.
  • Trust products include land development trusts, management trusts, disposal trusts, collateral trusts, sales management trusts and project management services, and other related businesses including realtor services and real estate consulting services.

Land Development Trust

Profits are maximized with the combination of landowner’s opinion, expertise of trust company and business knowhow

Maximizing Profits with Optimal Land Development

  • A product entrusted by landowners lacking in development know-how or financial capacity to a trust company to gain profits through efficient utilization of the land.
  • A trust company procures land and builds buildings on it bearing in mind the landowners’ ideas as well as expert knowledge, and raising the funds for construction. Then it returns a portion of the yield to the landowner after the sale or lease of the land.

Strengths

  • Land development can be optimized with the help of specialists, even if customers have no funds or experience in construction.
  • There are no worries about the financial burdens of business operation and procedural challenges.
  • Furthermore, experienced business operators conduct the business of direct sales or leasing, so sales possibilities are enhanced.
  • There is no tax imposed on registration of the official ownership acquisition pursuant to Article 110 and Article 128 of the Local Tax Act, so there is no fee needed for acquisition/registration tax even if the business site’s ownership is transferred to that of trustees.

Redevelopment Business

We return the property value
increases and profits to customers
through improvement and
development of poor
residential conditions.

Urban Maintenance Business

In the past, association method maintenance Business relying on constructors had various difficulties such as project expense securing problem because of insufficient expertise, share allotment of land owners, conflicts between associations and constructors and various corruptions and irregularities. To resolve these problems and to achieve efficient urban regeneration, in March 2016, city and residential environment maintenance law was revised and trust method maintenance Business was introduced. Through this, slow maintenance Business sites accelerated development and project efficiency was enhanced, and it is fast spreading to the entire nation through Seoul, Yeouido, and Gangnam.

Korea's first trust method reconstruction project order obtainment and construction beginning

KORAMCO REITs & Trust implements reconstruction projects' developmentㆍmanagementㆍoperation businesses in place for reconstruction association based on systematic legalㆍtechnologyㆍsales capability and capital. In particular, it has urban Maintenance Business headquarters specialized in urban maintenance and two maintenance Business teams under the headquarters, and in Devember 2015 obtained house reconstruction projects in Anyang and Hogye, the business proxy method house reconstruction projects for the first time as a trust company.House reconstruction projects in Anyang and Hogye were successfully completed with contracts of association members and the general public, through specialized construction management, it will be completed and residents will move in in 2019. As of the first quarter in 2018, KORAMCO asset in trust has the only experience of constructing trust type reconstruction projects, and it has become the best partner by expanding order obtainment not only through participation in the form of project proxy but also in the unilateral implementaion form.

  • Project Overview : house reconstruction project in Anyang Hogye dong (Hogye Daesunguneed)
  • Size : 2 floors under the ground~27 floors on the ground, a total of 203 households
  • Location : Anyang city Dongangu Hogyedong 891-6 area

KORAMCO Asset in Trust Reconstruction Implementation Status

Anyang city Seonggwang Hogye Silla apt.
house reconstruction maintenance Business

  • Selection general assembly : 2015.10.31.
  • Project proxy designation notification date : 2015.12.11
  • Starting date of sales : ordinary sales (2016.11)
  • Date of the start of the construction : 2016.11. 10.
  • Scheduled date for moving-in : 2019. 04

Seoul city Dobong district 2 house
reconstruction maintenance Business

  • Selection general assembly : 2017.10.28.
  • Project proxy designation notification date : end of December 2015
  • Date of scheduled start of sales : ordinary sales (2019.12. )
  • Date of the scheduled start of the construction :2019.1A402
  • Scheduled date for moving-in : 2021.12.

Incheon Jooandong Woojin apt. house
reconstruction maintenance Business

  • Selection general assembly : 2017.09.29.
  • Project proxy designation notification date : 2017.12.11.
  • Date of scheduled start of sales : ordinary sales (2019.03. )
  • Date of the scheduled start of the construction :2019.03.
  • Scheduled date for moving-in : 2021.08.

Incheon city Songrim distric 5 urban
environemnt maintenance Business

  • Selection general assembly : 2016.07.14
  • Project proxy designation notification date : 2017.03.02.
  • Date of scheduled start of sales : ordinary sales (2018.01. )
  • Date of the scheduled start of the construction :2018.01
  • Scheduled date for moving-in : 2020.09.

Management-type
Land Trust

Development projects are conducted
with greater stability and fewer
sales-related disturbances as it
effectively hedges default
/bankruptcy risks.

Maximizing the stability of project
execution and sales

  • Similar to a general land development trust, it differs in the funding mechanism: a consignor directly finances the required business costs from a financial institution and a developer and pays the cost. Therefore, development projects can be carried out with enhanced stability and sales-related disturbances can be prevented.

Strengths

A Trustor (Original Contractor)
Default-Risk Hedge

  • Upon the default or bankruptcy of a trustor, the entrusted property remains an independent property to be managed se-parately. Since a trust company is the developer, the business can be stably managed.

  • Prevention sales-related disturbances

    Upon the default or bankruptcy of a trustor, the entrusted property remains an independent property to be managed se-parately. Since a trust company is the developer, the business can be stably managed.

preventing project delay

  • Construction completion and delay of moving-in because of unexpected disputes between constructors and developers including contract violation, and fundamental prevention of unjust behaviors are prevented in advance(preservation registration in the name of a trust company), and practical authorities of interested persons can be enjoyed.

Management Trust

Professional real estate management
can reduce costs and raise real
estate values

Professional real estate management can reduce costs and raise real estate values

  • A trust product wherein a trust company takes charge of the real estate ownership, lease management, facility maintenance, legal affairs, tax and income management, and the return of income to its owners.
  • A trust company categorizes management trusts into two categories depending on the management scope : Class A management trusts and Class B management trusts.
  • Type A Management Trusts (comprehensive management) Management of the ownership, lease, facility maintenance, legal affairs and taxation of the entrusted real estate
  • Type B Management Trust (ownership management)a Management of only the ownership for the entrusted property

Strengths

  • The value and yield of customers’ real estate is enhanced based on the public trust and sales network of a trust company.
  • Real estate management can be accomplished more efficiently and professionally, and real estate management costs can be dramatically cut.

When it is in demand

  • When real estate cannot be directly managed as its owner stays abroad for a long period, is an elderly citizen or a juvenile.
  • When the owner hopes to consign the comprehensive and complicated real estate management to specialists, e.g. taxation in real estate and lease management.
  • When trustworthy asset management is necessary for the livelihood of surviving family members in the event of an owner’s death.

Disposal Trust

For real estate that cannot be easily
disposed of, the appropriate buyers
are found and the real estate is
disposed of at an optimal price
in a short period to cater
to customer needs.

Creating Optimal Outcomes with
Various Sales Techniques and
Information Networks

  • A trust product whereby appropriate buyers are found for real estate that is challenging to dispose of in terms Of due methods or procedures, or large-sized and high-priced real estate so that the real estate can be safely disposed of and the proceeds transferred to the beneficiaries.
  • A unique brokering method in that a trust company is entrusted with the real estate and holds the right and entitlement as a seller, so that buyers can safely buy the real estate.

Strengths

  • Techniques and information network enable disposal in a short period of time at a high transaction price.
  • Safe preservation of ownership is possible without separate procedures for real estate transactions which require considerable time from the sianina of sale agreement to full pavment settlement.

When it is in demand

  • When real estate is difficult to be disposed of via agent as it requires stability and reliability.
  • When the owner hopes to consign the comprehensive and complicated real estate management to specialists, e.g. taxation in real estate and lease management.
  • When one seeks to secure stability in land trading within the area permitted for land transaction.
  • When real estate cannot be directly disposed of as its owner stays abroad for too long or has emigrated abroad.
  • When real estate cannot be disposed of ordinarily, as it is large-sized and high-priced real estate, or the one with complicated rights relations.
  • For development projects and others, when the land and buildings cannot be purchased currently but can be secured in the near future.
  • When one wants to prevent the disclosure of identity of the real estate owner, whether it is the individual or the company.

Mortgage Trust

Mortgage Trust that is low-priced and convenient raises the convenience in accessing a financial institution and applying for loans.

Economical and Convenient
Advanced Collateral Scheme

  • This trust product is less costly than a mortgage product, and with its advanced collateral scheme, one can conveniently apply for a loan with the real estate as collateral.
  • Real estate trust companies are entrusted with real estate from the property owner (truster) and handle financial loans. When the loan expires and the relevant repayments have been successfully made,the trusted real estate is returned to the truster.
    However, in the event of default, the trusted real estate will be realized to make repayment to the creditor first and then the remaining money will be distributed to the truster or investor.

Strengths

For Debtor

  • Necessary costs including registration taxes are lower compared to the settlement of a mortgage.
  • One can be protected from a third-party financing institution during the trust contract period(Article 21 of the Trust Act)
  • In case of a default, the collateral real estate is promptly converted into cash via pubilc auction so that losses as a result of pro-longed auctions or low public auctuon prices can be prevented.
  • For additional loan applications, required costs can be reduced and the procedure is simple.

For Creditor (Financial Institution)

  • Management and workforce costs at the financial institution can be saved.
  • The collection period is shortened and the costs are reduced due to public auction.
  • Trust property does not become divisible for distribution amongst creditors nor belong toconsignors’ inherited property (Article 23, Article 24 of the Trust Act)
  • The trust property is guaranteed with independency, so its safety can be secured even upon the bankruptcy or reorganization procedure of borrowers or of a trust company.

Usages

  • When one seeks to raise funds from a financial institution collateralizing real estate that requires consistent and planned management such as office buildings, land to be developed and buildings to be remodeled.
  • When one applies for loans or refinancing collateralizing unsold real estate after a real estate development project is completed.
  • When one seeks refinancing for existing loans.

Collateral Trust vs Mortgage

Classification Mortgage Trust
Collateral Setting

Trust registration
(ownership transfer)

‘Class A’ on the registry
Preservation of
Collateral Value

Managed and preserved by
a trust company

Collection Procedure

Complicated/Long-term

Court auction

Impossible to sell the collateral real estate at high prices
Category of the Real Estate Divisible for Distribution amongst Creditors

ㆍExcluded from the category

Request for Subordinated Rights for New Lease

Possible to exclude

Favorable in maintaining the collateral value
Required Fees

Exemption for registration / local education tax and purchasing of National Housing Fund bonds

Trust fees (cheaper than mortgage fees)

No need to set superficies
Classification Mortgage
Collateral Setting

Mortgage setting

‘Class B’ on the registry
Preservation of Collateral Value

Managed and preserved by a financing institution
Collection Method

Simplified/Short-term

Public sales on the open market

Impossible to sell the collateral real estate at high prices
Category of the Real Estate Divisible for Distribution amongst Creditors

Excluded from the category
Request for Subordinated Rights for New Lease

Impossible to exclude
Required Fees

Registration/Local education tax: 0.24% of the maximum credit amount

National Housing Fund bonds: 1% of the aximum credit amount

A need to set superficies

Sales Management Trust

Successful sales are guaranteed by
minimizing the burdens of business
operators and strengthening the
rights of developers.

Triggering Sales through Higher Transparency and Safety

  • According to the Act on the Sale of Buildings, developers of sales projects allow a trust company to preserve and manage the real estate ownership and sales proceeds of the investors and business participants for the purpose of pre-construction sales. This is a trust product to ensure that sales projects are conducted successfully and the ownership is safely transferred to the buyers after the usage approval.

Strengths

  • This trust minimizes the initial burden for developers due to pre-build & post ?sale model and guarantees stability thanks to the early collection of proceeds.
  • Through contract management and safe management of sale proceeds, purchaser’s rights are fully guaranteed. Transparency in the sales process and safety in transactions are guaranteed, and purchasers are fully protected, which would trigger greater sales.

Competitiveness

    Pre sales of buildings in accordance with 'Law about sales of buildings'
    1) trust contract with a trust comoany and proxy business contract conclusion
    2) guarantee insurance product use
    3) after completion of frame construction by two thirds,
    Therefore, due to sales management trust project, commercial facility's pre sales and stable cash flow maintenance are possible. In general, there are tendency to avoid joint guarantee of other companies, and the competitive power of trust commission fee in preparation for gurantee insurance products.

Where Sales Management Trusts could be applied

  • For buildings with the floor area to be sold over 3,000 square meters.
  • For officetels (office+hotel) that have over 20 rooms.
  • For buildings on lease on the condition of being sold after being leased whose total floor area is over 3,000 square meters.
    * Exceptions: Housing and welfare facilities, apartment-type plants, tourism and accommodation facilities and elderly welfare facilities

Agency Service

Real estate-related tasks are
promptly and accurately handled based on
expertise and trust by providing
project management services.

Catering to Customer Needs through Professional Consulting

  • The trust company provides secure and swift handling of various services related to approval procedures, research, sale proceeds, loan repayment, execution of project costs and other matters related to the acquisition or disposal of real estate on behalf of the client.

Strengths

  • KORAMCO REITs & Trust enhances the possibilities of success for various types of transactions based on its public confidence.
  • Leveraging on its expertise and information capabilities as a trust company, optimal business plan can be set up and the most suitable construction companies can be found while minimizing the permit and approval period.
  • If a trust company manages the sales income under its project management service, the trust worthiness of the company gets rid of any buyer concerns and triggers greater sales, and makes financing from financial institutions easy.

Service Scope

  • Management service for acquisition and disposal of real estate
  • Management service for real estate sales
  • Management service for real estate management (including sales income and fund management)
  • Management service for real estate development (including permit and approval)