The initial public offering of JR Global REIT, set to be South Korea’s first listed REIT backed by overseas property, was undersubscribed 0.23 times by individual investors in the book building process between July 22 and 24, according to lead managers, reflecting tepid interest in stable income assets.
The real estate investment trust (REIT) backed by the Finance Tower in Brussels planned to raise 485 billion won ($403 million) in a public offering, targeting an annual dividend yield of 8%. It will get listed on the Korea Stock Exchange in early August.
JR Global REIT is the parent of the sub REIT that funded the $1.6 billion acquisition of the Finance Tower in December 2019. In a pre-IPO, it raised an additional 343 billion won last month.
The shares reserved for institutional investors were oversubscribed 18 times earlier this month. The subscription rate was significantly lower, compared to the recent IPOs of biotechnology and rechargeable battery makers which gathered much stronger subscriptions from both institutional and retail investors this month.
The languid demand marked a reversal of investors’ enthusiasm for REITs which used to be one of sought-after asset classes in rangebound stock markets last year.
Citing lukewarm responses from institutional investors, Mastern Investment Management Co. Ltd. on July 20 postponed its REIT’s IPO backed by the Crystal Park office complex in France by a couple of months.
It planned to raise 200 billion to 250 billion won through the planned IPO to fund the 691 million-euro purchase of the property, offering a target dividend yield of over 6% per annum.
As the broader KOSPI index has rebounded by 53% from a trough scraped in March on the back of massive capital inflows, Korean investors have been flocking to high-growth stocks, deepening a divide between the growth sectors and others.
The IPO of SK Biopharmaceuticals Co. Ltd. last month was oversubscribed 323 times by individual investors. Genolution Inc., a diagnostic device manufacturer listed on the junior Kosdaq market this month, saw its public share sale oversubscribed 1,162 times.
In contrast, the IPO of IGIS Resident REIT, managed by IGIS Asset Management Co. Ltd., received bids just three times by retail investors in the recent book building process.
Underperforming shares of the listed REITs added to the downbeat tone, given the sector’s sensitivity to the economic cycles.
Last year, the public share sales of NH Prime REIT and Lotte REIT received subscriptions 317.6 times and 63 times by individual investors, respectively, but their shares have been trading near the face value of 5,000 won or slightly below.
IGIS Value Plus REIT Co. Ltd., backed by commercial buildings in Korea, also has remained below 5,000 won since its first trading day on July 16.
The two IPO managers of JR Global REIT – KB Securities Co. Ltd. and Meritz Securities Co. Ltd. – and the underwriter Daishin Securities Co. Ltd. will take over the unsubscribed shares in proportion.
Amid languid interest, a handful of other REIT IPOs with various underlying assets are preparing to go public in coming months.
Koramco Energy Plus REIT backed by 187 gas stations in South Korea is seeking an August IPO to raise 106.6 billion won. It is poised to become the country’s first gas stations-backed REIT.
Kendall Logistics Properties is expected to raise 700 billion won in an IPO later this year.
By Woosang Lee
<Edited by Yeonhee Kim>