Korea Investment & Securities said on the 16th that for Shinhan Global Active REIT, the key is the recovery in overseas real estate values, adding that while a short-term rebound in the share price is limited, investors should take a long-term approach. It did not provide a separate investment opinion or a target price. Shinhan Global Active REIT closed at 1,303 won the previous day.
Korea Investment & Securities noted that although the downtrend in Shinhan Global Active REIT's share price has continued, making for painful conditions, it is focusing on the fact that the REIT is strengthening its fundamentals internally. Through the second quarter, the main downside risks were the settlement payment for currency hedges, high-interest borrowing fund, and the decline in U.S. real estate values; two of these factors have been resolved.
Shinhan Global Active REIT repaid its high-interest borrowing fund with an all-in rate of 8.5% using proceeds from a partial sale of the PRISA fund.
Nam Chae-min, an analyst at Korea Investment & Securities, said, "By repaying the borrowing fund, interest expense that came to 1.2 billion won in fiscal year 5 declined sharply to around 400 million won in fiscal year 6."
On top of that, the currency hedge settlement issue has been resolved. With the won-dollar exchange rate surging since the end of last year, the currency hedge contracts expired in July and Aug. this year. As a result, the burden of settlement expenditure increased and dragged the share price down. The won cash settlement totaled 10.6 billion won and has been completed, and it was paid through a 4.8% credit line secured via an affiliate. Annual interest expense of about 510 million won is expected.
Nam said, "The maturity exchange rate of the new currency hedge contract is 1,352.68 won, and with maturity in Jan. 2027, there is no currency hedge settlement issue that requires a short-term response."
Korea Investment & Securities said the immediate risks have been contained, but a short-term rebound in the share price will be limited. That is because the recovery in overseas real estate values has been slow. It also pointed out that the reduction in dividend resources following the sale of the PRISA fund is a disappointment.
Nam analyzed, "Along with U.S. rate cuts, we expect a gradual recovery in value, given that U.S. commercial real estate indicators have been on a rebound trend since the third quarter of 2024."