SK Group eyes IPO of headquarter-backed REIT in 2021

South Korea’s SK Group has begun the process to list a real estate investment trust (REIT) backed by its head office building and some 100 petroleum stations owned by its energy unit, which is expected to raise between 400 billion and 500 billion won ($360 million-$450 million).

The planned IPO could be the largest public offering of a Korea-listed REIT, dwarfing Lotte REIT Co.’s 430 billion IPO in October 2019. It also may serve as a new litmus test for investor interest in domestic REITs lagging the broader market rallies that began late last year.

The energy-to-telecom-focused conglomerate will speed up the IPO process for the REIT upon regulatory approval. It recently hired Korea Investment & Securities as the IPO underwriter, aiming to list it within the year, according to investment banking sources on Mar. 3.

The REIT will include SK Group’s headquarters building in Seoul and SK Energy-owned petroleum stations and other properties as underlying assets. To do so, it is currently in talks to buy back the SK Seorin Building from Hana Alternative Asset Management Co. via the REIT.

SK holds a preemptive right to buy it back, after it sold the 36-story property to Bank of America Merrill Lynch in 2005 to fund its acquisition of a petrochemical company, now called SK Incheon Petrochem Co. It has been leasing the building that houses SK Holdings Co., SK Innovation Co. and SK E&S Co.

In addition to the planned repurchase of the headquarters, SK plans to invest the IPO proceeds in new businesses such as bio, rechargeable batteries and fifth-generation telecommunications technology.

REITs have been out of favor despite the stock markets' bull run, with investors chasing growth stocks. Last year, a string of REIT IPOs met with lukewarm responses from Korean investors.

IGIS Value REIT, IGIS Residence REIT and Koramco Energy Plus REIT, which went public last year, have been trading below their IPO price of 5,000 won per share. Koramco Energy Plus REIT is backed by 187 petroleum stations Koramco acquired from SK Networks Co.

In comparison, JR Global REIT and ESR Kendall Square REIT Co. are the only REITs trading above 5,000 won.

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

Yeonhee Kim edited this article.