Seoul Yongsan International Business District and major development sites within the 3rd new town will be developed using a real estate investment company (REITs) model.
The Ministry of Land, Infrastructure and Transport will hold a government-local government (local corporation) council on the afternoon of the 19th at the Korea REITs Association to share specific REITs development projects aimed at 'activating development projects using the REITs model.'
This council was established to build a collaborative system between the government and local governments in the early stages of the system's implementation, following the recent amendment of the 'Real Estate Investment Company Act,' which provided a legal basis for project REITs and regional co-prosperity REITs.
A REIT is a real estate indirect investment institution that collects funds from multiple investors, which are then used by a professional asset management company (AMC) to acquire, develop, or operate real estate, distributing the revenue as dividends to investors. Project REITs are specialized REITs that reasonably relax regulations during the development stage. Regional co-prosperity REITs limit the eligibility to publicly offer REIT shares to prioritize providing real estate benefits to local residents.
With the amendment of the Real Estate Investment Company Act, it has become possible to develop and operate real estate with project REITs that have stable equity capital. In addition, due to the nature of REITs distributing dividends to investors, it will now be possible to provide opportunities for multiple investors to participate, moving away from the traditional focus on a single project operator. In particular, for major regional development projects, it will be possible to prioritize offerings to residents through regional co-prosperity REITs.
At this council, four local governments and 12 local corporations, along with the Korea Land and Housing Corporation (LH), will share the current status of major urban development projects that are under review.
Seoul, Gyeonggi Province, and Incheon Urban Corporation will promote major development projects using the REITs model in line with the implementation of the revised law in the second half of next year.
The Seoul Metropolitan Government plans to prioritize introducing regional co-prosperity REITs in the Yongsan International Business District and is considering expanding this to various projects, such as public sites that the city is developing directly or looking to sell. The Seoul Housing and Communities Corporation (SH Corporation) will also promote the introduction of regional co-prosperity REITs for sites it is developing for mixed-use zones.
Gyeonggi Province, in collaboration with the Gyeonggi Housing and Urban Corporation (GH Corporation), plans to introduce the 'Gyeonggi Opportunity REITs' to develop major development sites within the 3rd new town as healthcare REITs, public infrastructure REITs, and tech REITs, while prioritizing the public offering of REIT shares to local residents. The healthcare REITs will develop and operate senior housing while providing medical services. Public infrastructure REITs will alleviate the financial burden on local governments and supply social infrastructure (SOC) in a timely manner. Tech REITs will develop and operate data centers, solar power plants, and wind farms, which are essential assets for Mirae Industries and other future industries.
Incheon Urban Corporation will develop a 90,000 square meter public housing complex near Jemulpo Station through a project REIT, supplying 3,497 dwellings by 2031.
Based on the results of the council, the Ministry of Land will consider measures to enhance urban competitiveness through the establishment of a sound business model where professional real estate companies directly manage assets after their development, as well as providing urban regulatory exemptions such as public contributions and relaxations of floor area ratio regulations.
Kim Gyu-cheol, head of the Housing and Land Office at the Ministry of Land, said, 'With the introduction of project REITs equipped with stable equity capital, we expect to strengthen the overall business soundness in the market,' and added, 'Through collaboration between the government and local governments, we will activate regional development using the REITs model to disperse speculative demand concentrated on physical real estate, and we will transform the paradigm of the real estate industry so that business benefits can be provided not to a few but to many citizens.'