South Korea’s SK REIT Co. has been diversifying funding sources into short-term debt to finance its recent purchases of landmark office buildings, which will nearly double its assets under management to 3 trillion won ($2.2 billion) in one year.
The real estate investment trust company will raise 758.5 billion won ($550 million) in bonds, according to people with knowledge of the matter on Wednesday.
The debt funding will be split into 360 billion won in bonds with maturities of up to three years and 398.5 billion won in debt that matures within one year.
Their terms and conditions will be fixed at a Sept. 16 shareholder meeting.
In July of this year, the SK Group arm decided to buy 100% of Jongno Tower, a 33-story landmark office building in the central business district of Seoul. The purchase price is around 700 billion won, the sources said.
SK REIT is backed by SK Group’s headquarters SK Seorin Building and SK Energy’s 116 gas stations nationwide.
In June this year, it acquired the SK-U Tower, an A-grade head office building of SK Hynix Inc. in Bundang, near Seoul, for 507.2 billion won.
For the June transaction, it raised 250 billion won in short-term debt and paid it back with the proceeds of a 210.1 billion won rights offering.
SK REIT is on track to reach its AUM target of 4 trillion won by next year and grow into a global REIT company with 10 trillion won in AUM.
It also plans to issue additional shares later on to repay the new short-term debt.
SK REIT boasts the highest credit rating among listed REIT firms in South Korea, rated double-A minus with a stable outlook. Its short-term debt carries the rating of single A1.
Meanwhile, Mirae Asset Global Investments Co. is working on a REIT launch to buy the International Finance Center tower for 4.1 trillion won.
The REIT was supposed to secure 2.1 trillion won in senior loans at an annual rate of 4.2% and another 2 trillion won in equity financing. But the Ministry of Land, Infrastructure and Transport dismissed the financing plan and advised Mirae to cut the leverage of the acquisition deal.
Write to Seok-Cheol Choi at dolsoi@hankyung.com
Yeonhee Kim edited this article.
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