SK REIT sets goals, including a quarterly dividend

SK Inc. headquarters in Jongno District, central Seoul [YONHAP]

SK Group's first real estate investment trust (REIT) said Wednesday it plans quarterly dividend payouts in the mid-5 percent range if it completes its listing next month on schedule.

SK REIT will become the first publicly listed REIT to pay a quarterly dividend, according to Shin Do-chul, CEO of SK REITs Management, an asset management company wholly-owned by SK Inc. that will manage the assets acquired by SK REIT.

SK REIT, a special purpose corporation 50-percent-owned by SK Inc., applied to go public in July.

SK REIT acquired the SK Building, headquarters to a number of SK affiliates including SK Inc. and SK Innovation, for 1 trillion won ($856 million). It also acquired 116 gas stations directly operated by SK Energy, the group's oil refining unit, for 765.4 billion won.

The SK Building is master-leased by SK Inc. for five years. The gas stations are master-leased by SK Energy for 10 years.

"We are pretty confident we will be able to give out quarterly dividends with a yield rate at around 5.45 percent [...] though of course we can never make promises," Shin said during an online press briefing held Wednesday. "Considering our properties earn fixed rental income and all the assets will be in triple net lease agreements with tenants, the dividend rate is not expected to be volatile."

Triple net lease agreements on a property mean that tenants are paying all the expenses on the property including real estate taxes, insurance premiums and maintenance fees.

Shin said the REIT has a lot of growth potential as it will have preferred rights to acquire key office buildings used by SK affiliates such as SK Telecom's headquarters in Jung District, central Seoul, and SK hynix's Bundang office building in Gyeonggi.

When more SK assets are included in SK REIT's portfolio, Shin estimated the REIT will grow into a 4-trillion-won trust by 2024.

SK REITs Management is planning on developing some of the 116 gas stations into office buildings or hotels for better value or sell them. Some of the gas stations could be upgraded into bigger facilities.

Shin said that while many of the assets within SK REIT's portfolio will be SK Group properties, it also has plans to acquire foreign assets related to the group's businesses.

Asked what led SK Group to jump into the REIT business, Shin said it is a "part of group-wide growth strategy."

On whether there are any risks facing SK REIT, Shin said interest rate increases could increase volatility in profits of the REIT.

SK REITs Management was started in January and got approval to be an asset management company from the Land Ministry in March. SK REIT was founded on March 15. SK REIT's capital amounts to 542.5 billion won before initial public offering (IPO.)

Through the IPO, SK REIT will offer 46,510,266 shares at a price of 5,000 won to raise 232.6 billion won. Subscriptions will take place from Aug. 30 through Sept. 1.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]