Investors flock to REIT shares

Hana Financial Investment analyst Chae Sang-wook speaks during an investment briefing for the Lotte Real Estate Investment Trust, at the brokerage's head office on Yeouido, Seoul, Oct. 2. / Courtesy of Hana Financial Investment

By Jhoo Dong-chan

The shares of real estate investment trusts (REITs) are continuing their bullish run of the past year thanks to investors' rush to seek stable dividends amid the nation's sluggish stock market, according to analysts.

A REIT is a firm that operates various income-producing real estate, ranging from office and apartment buildings to warehouses, hospitals, shopping centers, hotels and even woodland.

Investors are also eyeing foreign REITS as Korea's stock market has stagnated.

According to the Korea Exchange, Sunday, the share price of Shinhan Alpha REIT closed at 8,570 won ($7.34) in the Nov. 1 session, up nearly 3,000 won from a year ago.

The share price of E REITs KOCREF has jumped 32.4 percent from a year ago.

Experts said domestic REITs are likely to continue their uptrend for awhile.

“Domestic REITs account for less than 0.1 percent in aggregate market value of listed firms in Korea,” said Hana Financial Investment analyst Chae Sang-wook.

“More REITs are expected to list themselves on the Seoul bourse under the current uptrend. There is still room for growth.”

Last month, Lotte REIT concluded its initial public offering (IPO), raising 429.9 billion won before it listed on the benchmark KOSPI. It was the most a domestic REIT had raised on the Seoul bourse.

Lotte REIT listed on Oct. 30, with an offering price of 5,000 won. It closed Friday's session at 6,360 won, up more than 20 percent from its initial price.

REITs are also making their presence felt in the nation's mergers and acquisitions (M&A) market.

Koramco REITs & Trust said Sunday the Koramco-Hyundai Oilbank consortium was selected as a preferred bidder to acquire 324 SK Networks gas stations across the country.

And according to the Korea Financial Investment Association (KOFIA), Koreans invested 160 billion won in foreign REIT shares over the past month.

Hana Financial Investment researcher Yoon Seung-hyun said the U.S. REIT market is domestic investors' favorite destination.

“An increasing number of investors are looking for alternative investment sources amid the low interest trend in the U.S.,” Yoon said.

“More investors invest their money especially in the commercial real estate market there. Reflecting rapid growth in e-commerce and data technologies, firms will need more warehouses and data centers in the future.”

KOFIA data showed the market cap of the U.S. REIT market was $1.3 trillion as of June 30. These REITs paid $56.7 billion in dividends last year, a yield rate of 5 percent.