The stock price of Shinhan Global Active REIT has dropped to about half of the offer price just seven months after its listing. This REIT (Real Estate Investment Trust) invests in three U.S. real estate funds, and the decline has been significantly affected by reduced expectations of interest rate cuts in the U.S. and prolonged sluggishness in the local office market.
Among investors, there are calls to liquidate before their net worth decreases further due to the sharp decline in stock prices. Shinhan REIT Asset Management noted that the recent drop in stock prices occurred excessively without special reasons. They mentioned they are preparing measures to improve their financial structure.
Shinhan Global Active REIT shares closed at 1,555 won on the 10th. The stock price fell 7.72% (130 won) from the previous trading day. Shinhan Global Active REIT's stock price also decreased by 6.54% (118 won) on the 7th. The decline continues, with the stock price being 48.17% (1,445 won) below the offer price (3,000 won).
Shinhan Global Active REIT listed in July last year with the slogan of "easy and reliable overseas real estate investment for everyone." It has a structure that gives back the profits received from investing in three U.S. real estate funds (USGB, PRISA, CBRE USCP) as dividends. It is diversified into logistics, residential, and retail assets centered around office buildings rented long-term by U.S. government agencies.
However, except for the first day of listing, the stock price has never exceeded the offer price. Furthermore, after the inauguration of Donald Trump's second administration, expectations for interest rate cuts have diminished due to changes in tariff and immigration policies, which has further increased the stock price decline. According to preliminary investment results in basic assets that Shinhan Global Active REIT compiled on the 7th, the USGB return, the largest investment scale, recorded -0.96% in the fourth quarter of last year (October to December).
Concerns have arisen that the promised 8.5% dividend yield over the two years since the listing of Shinhan Global Active REIT equates to self-sabotage. This is because, in a situation where the dividends received from the invested funds are stagnant, they have to cover the shortfall with cash assets held. Investors are worried that if the dividend record date, scheduled for the end of February, passes and the ex-dividend occurs, the stock price could fall further.
The cost burden is expected to grow significantly, especially with the soaring exchange rate of the U.S. dollar against the won (won/dollar exchange rate). Shinhan Global Active REIT has signed currency hedge contracts worth $71 million each with SC First Bank and Shinhan Bank. The contract maturities are set for July and August.
The won/dollar exchange rate under the currency hedge contracts is 1,280.88 won for SC First Bank and 1,290.25 won for Shinhan Bank. If the won/dollar exchange rate stays at around 1,450 won like it is now, they will have to pay approximately 12 billion won to SC First Bank and 11 billion won to Shinhan Bank as settlement for the currency hedge contracts.
Shareholders are expressing their anger, saying they trusted the Shinhan brand and ended up incurring losses. On the Shinhan Global Active REIT website, comments like "How did you manage operations for the stock price to fall by 50% after the listing?" "Was the fund presented at a misleading base price during its listing?" and "Please come up with countermeasures" have been posted.
There are even opinions suggesting to liquidate. Given that the current stock price is higher than the net asset value (NAV) per share, the idea is that it would be less damaging for shareholders to liquidate and receive distributions before NAV decreases further due to dividend and currency hedge settlement payments.
However, Shinhan REIT Asset Management explained that the stock price drop is excessive when considering the current NAV per share. According to Shinhan REIT Asset Management, the NAV per share of Shinhan Global Active REIT is around 2,500 won. They also mentioned that even after factoring in the currency settlement amount, the NAV per share is 2,300 won, which is 48% higher than the current stock price.
Shinhan REIT Asset Management is discussing additional measures to strengthen the financial structure of Shinhan Global Active REIT. A representative from Shinhan REIT Asset Management stated, "We will uphold the commitments made to investors through cost-cutting and other measures."