It has been confirmed that the Ministry of Land, Infrastructure and Transport has launched a special inspection of Maston Investment Management. The inspection was prompted by financial incidents and non-performing loan issues arising from the real estate investment trusts (REITs) managed by Maston Investment Management.
The Ministry of Land, Infrastructure and Transport plans to confirm whether there were any violations of the Real Estate Investment Company Act during the management of the relevant REITs and is considering follow-up actions, including requesting a police investigation. A REIT is an indirect real estate investment product that gathers funds from multiple investors to invest in commercial real estate and logistics centers, returning rental, sales, and operational profits to investors in the form of dividends.
According to ChosunBiz on the 26th, the Ministry of Land, Infrastructure and Transport conducted an on-site special inspection of Maston Investment Management at the end of last year. The Ministry generally inspects REIT management companies every three years. Additionally, special inspections are implemented in cases of financial incidents, illegal activities, and public interest reports.
This special inspection aims to check the operational status of the REITs managed by Maston Investment Management and to determine the causes of the non-performing loans. The Ministry is investigating all of the REITs managed by Maston Investment Management, including Maston No. 11.
The Ministry's special inspection was prompted by the report released in October of last year regarding the occurrence of 'Maston No. 11 financial incident and non-performing loans.' Maston No. 11 is a REIT established based on the News Stay (corporate rental housing) business by Maston Investment Management.
According to the announcement, a financial incident occurred at a rental housing business site located in Cheonan. The core issue involves a company that is the parent company of the project company and an asset management (PM) firm unlawfully receiving approximately 5 billion won in rental fees and deposits from tenants.
In principle, REITs develop and operate real estate through project companies based on funds raised from investors, returning rental fees and deposits as revenue to investors in the form of dividends. However, in this case, the PM firm failed to transfer the funds to the proper REIT account and instead received them in a separate account, causing the issue.
Funds that should have been collected by the REIT flowed into the PM company's account, and the REIT had to process this as 'accounts receivable.' If the funds are not recovered within a certain period, they can only be recognized as 'non-performing loans' in accounting.
Ultimately, the Ministry's assessment is that there is a possibility that the project company embezzled funds, leading to the REIT's non-performing loans. It has also been pointed out that Maston Investment Management did not recognize this fact, resulting in an ineffective internal control system. A Ministry official noted, 'This incident is a case of fraud and embezzlement by the PM firm, but the asset management company (AMC) Maston Investment Management cannot evade management responsibility.'
Maston Investment Management has previously faced allegations of inadequate internal management and oversight. In 2023, allegations were raised that former representative Kim Dae-hyung held multiple significant positions as the major shareholder, board chair, and investment review committee chair of the management company, pursuing personal benefits using the company's capital. In response, the Financial Supervisory Service investigated the appropriateness of internal controls and investment review procedures.
Through this special inspection, the Ministry of Land, Infrastructure and Transport is closely examining whether Maston Investment Management fulfilled its investor protection obligations and whether it appropriately operated its internal control standards. According to the Real Estate Investment Company Act, REIT management companies must establish and thoroughly adhere to internal control standards for investor protection. The Ministry plans to investigate whether Maston Investment Management properly adhered to these standards and whether there were any false reports.
If violations of the Real Estate Investment Company Act are confirmed, the Ministry of Land, Infrastructure and Transport may request a police investigation after internal procedures. However, for minor violations, there is also a possibility of a fine of up to 5 million won or corrective measures.
The Ministry of Land, Infrastructure and Transport will convene emergency meetings with about 25 asset management companies (AMCs) operating rental REITs to discuss strengthening management and supervision of the overall REIT market following this incident. During this meeting, the Maston Investment Management case will be shared, and the AMCs will be requested to self-inspect their rental management operating status to prevent similar cases from occurring. The Ministry plans to review measures to enhance the overall management and supervision of rental REITs as a result of this meeting.
A Ministry official stated, 'We are currently verifying additional facts during the special inspection process, and if violations are found, we will take appropriate action,' adding that 'the inspection results are expected to be announced in the first half of the year.'