Lotte REIT to go public on Korea Exchange today

By Lee Kyung-min

Shares of Lotte Real Estate Investment Trust (REIT) will be publicly traded on the local bourse from Oct. 30, the bourse operator said Tuesday.

The Korea Exchange (KRX) said that Lotte REIT will be listed on the benchmark KOSPI. A REIT refers to a company that owns, or in most cases operates, income-producing real estate ranging from apartments to various commercial buildings.

The listing follows the firm's Oct. 7 announcement of an initial public offering (IPO) price of 5,000 won ($4.29) each for 86 million shares.

With about 1.5 trillion won in assets under management, the real estate investment trust has set its target for a dividend yield of 6.39 percent.

This firm said this is an attainable goal given most of the contracts involving the income-producing buildings under management of Korea's fifth-largest conglomerate are leased for a 10-year period on average, during which stable income is guaranteed from monthly rent.

The firm has drawn over 4.7 trillion won from investors as of Oct. 11, indicating huge popularity of the alternative investment amid growing uncertainties both at home and abroad that have translated into falling interest rates and greater volatility in the stock market.

Many investors are turning to relatively high-yield, moderate-risk financial products as interest income from installment and savings accounts are dropping fast following the central bank's rate cuts over the past few months.

Also driving the popularity of the property market-based investment is a recent fiasco involving derivative-linked funds, the high-yield, high-risk investment that led to major investment losses after the underlying assets performance fell far short of expectations.