South Korea’s Lotte REIT, a real estate investment trust under the country`s fifth largest conglomerate Lotte Group, will go public this month to become the country’s biggest REIT listed in the market in terms of assets under management estimated at 1.5 trillion won ($1.3 billion).

In a press conference on Monday, Lotte REIT announced plans to offer 85.98 million shares at an initial public offering (IPO) price of 5,000 won apiece, the highest price of its IPO price band between 4,750 won and 5,000 won. The company invited institutional investors from home and abroad for a book-building session from Sept. 23 to Oct. 2 on 55.89 million shares or 65 percent of total offering and determined the IPO price at 5,000 won apiece. The session was attended by an overwhelming number of 969 institution investors.

Public subscription for the remaining 35 percent or 30.09 million shares is scheduled from Oct. 8 to 11. The company expects to raise up to 429.9 billion won from the IPO.

Lotte REIT – founded in March – is a real estate investment trust that aims to securitize property assets of Lotte Shopping Co. If it goes public as planned this month, it would be the country’s biggest real estate investment trust listed on the country’s Kospi market in terms of assets under management.

The retail properties of Lotte REIT’s asset portfolio are mainly commercial properties – four department stores, four large discount stores, and two outlets all owned by Lotte Shopping. Total floor area of the assets is 638,779 square meters, and their combined value is estimated at about 1.5 trillion won.

Lotte REIT will pay out dividends to investors from its lease profits. Lotte REIT already owns Lotte Department Store’s Gangnam branch in southern Seoul, which is considered a core asset. It plans to additionally purchase remaining assets with the proceeds from the IPO. Lotte REIT’s target payout ratio for next year is set between 6.3 percent and 6.6 percent.

Lotte REIT said that it will sign a long-term responsibility lease contract with Lotte Shopping to minimize asset management and operation risk. The company will aim to provide stable and long-term dividends to investors based on fixed lease payment from Lotte Shopping.

After the IPO, Lotte Shopping, which handed over Lotte Department Store’s Gangnam branch to Lotte REIT, will own a 50 percent stake in Lotte REIT shares, and Lotte AMC, an asset management company wholly owned by Lotte Holdings Co., will be responsible for asset management.

Lotte AMC said that it will come up with a growth roadmap based on Lotte Shopping’s strong retail assets to become a major real estate investment trust listed on the country’s primary bourse.

By Chung Seung-hwan and Lee Eun-joo

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