April 26, 2024

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Lotte REIT on Oct. 11 wrapped up its blockbuster initial public offering to raise a combined 429.9 billion won ($362 million) before Kospi listing, as newly issued shares were oversubscribed to retail investors.

The better-than-expected response overshadowed concerns on the mega IPO of a real estate investment trust here that were earlier this year sparked by Homeplus REIT’s failed attempt to raise 1.7 trillion won, due to lukewarm institutional investor interest.

The IPO’s retail tranche for 35 percent of newly issued Lotte REIT shares was 63.28 times subscribed, according to Lotte Asset Management Company, a sole Lotte REIT manager.

This came as some 86 million newly issued shares of Lotte REIT -- accounting for half of its entire stake -- were valued at 5,000 won per share at the high end of the marketed range, during an institutional tranche that finished Oct. 8. Some 65 percent of the new shares were subscribed over 350 times by institutional investors. 

A promotional image of Lotte Department Store in Guri, Gyeonggi Province, one of Lotte Shopping's real estate assets securitized for Lotte REIT.

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It is the first REIT by Korean-Japanese retail-to-chemical conglomerate Lotte, whose IPO was underwritten by Korea Investment & Securities, Nomura Financial Investment Korea and HSBC’s Seoul branch.

Lotte REIT is scheduled to be listed Oct. 30 on the main bourse Kospi.

The Lotte REIT IPO would raise the greatest funding this year on Korea’s stock market to date. It would also become the largest REIT by market value trading on stock market.

Managed by Lotte AMC, a wholly owned direct subsidiary of the conglomerate’s Korean holding firm Lotte Corp., Lotte REIT takes control of securitized real estate in Korea owned by Lotte Shopping -- four department stores, four discount stores and two factory outlets. Rental income that Lotte REIT earns is to benefit investors with dividend yields projected at 6.3-6.6 percent for the next year.

REITs have been emerging as popular destinations for Korean retail investors. The Korean stock market is trading five REITs, including Shinhan Alpha REIT and E-REITs Kocref.

In the meantime, more REITs are moving to be listed on the nation’s stock market. By the first half of 2020, Korea is expected to see up to seven more REIT IPOs, backed by investment firms including NongHyup REITs Management and Igis Asset Management.

Despite recent market uncertainties, Korea’s stock market is seeing more IPOs this year, including that of Hanwha Systems that could raise up to 460 billion won. 

By Son Ji-hyoung (consnow@heraldcorp.com)