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REIT

SK Group mulls headquarters buyback through REIT

Nov 16, 2020 (Gmt+09:00)

Energy-to-telecom-focused SK Group is considering buying back its headquarters in Seoul through a real estate investment trust (REIT) vehicle after the property, estimated to be worth 1 trillion won ($903 million), was recently put back on the market.

Back in 2005, the South Korean conglomerate sold the SK Seorin Building to Bank of America Merrill Lynch to fund its acquisition of a petrochemical company, now called SK Incheon Petrochem Co. Since then, it has been leasing the 36-story building that houses SK Holdings Co., SK Innovation Co and SK E&S Co.

SK Seorin Building in Jongno-gu, Seoul

SK Holdings, the holding firm of SK Group, recently submitted a preliminary application to set up a REIT management company to the land ministry, according to investment banking sources on Nov. 16. It is part of its efforts to improve its financial conditions and raise new capital to grow new businesses such as biotechnology, rechargeable batteries and a fifth-generation communication system.

The REIT’s first target is the headquarters building which Hana Alternative Asset Management Co., its current owner, has put up for sale, the sources said.

The SK Group received preemptive rights to buy the SK Seorin Building back when it sold the property to BoA Merrill Lynch. It is still allowed to exercise this option.

Once it receives approval for the REIT, it will begin to tap investors to raise capital.

The capital, to be pooled by the REIT, will be channeled into the group’s new businesses. 

SK Holdings has long prepared to set up a REIT by forming a task force team. It recently hired REIT professionals from Koramco REITs Management & Trust Co., South Korea’s No.1 REIT company.

Koramco REITs launched and listed Koramco Energy Plus REIT in August this year, based on the 187 petroleum stations it had acquired from SK Networks Co.

In addition to SK Seorin Building, the upcoming REIT is expected to encompass SK Energy-owned petroleum stations and other properties as underlying assets. 

Industry watchers see a chance of SK Group's REIT going public, following in the footsteps of Lotte REIT.

South Korea's leading retailer Lotte Shopping Co. launched the REIT company backed by department and discount stores as well as outlet malls in Korea. It was listed on the Korean stock exchange in October of last year. Until now, Lotte Shopping is the only Korean business group that has launched and listed a retail-backed REIT.

Write to Jin-sung Kim at jskim1028@hankyung.com

Yeonhee Kim edited this article.

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