[Edaily Marketin KIM SUNG-SOO Reporter] Shinhan Global Active REIT is conducting a rights offering to raise capital aimed at ensuring “long-term financial stability” and “strengthening dividend competitiveness.” As the won-dollar exchange rate has fallen, the burden of currency hedging costs has decreased more than expected, allowing the REIT to utilize the secured funds more efficiently.

Market observers view this rights offering as more than just a means of raising funds; they see it as a “restructuring effort” aimed at improving the REIT’s financial structure and expanding its dividend capacity.

First Capital Increase of 30 Billion Won… Full-Scale Capital Expansion to 65 Billion Won Begins

According to the financial investment industry on the 28th, Shinhan Global Active REIT resolved at a board meeting on the 24th to conduct a first capital increase of 30 billion won for its subsidiary REIT, “Shinhan Global No. 1 Trust-Managed Real Estate Investment Corporation” (hereinafter “Shinhan Global No. 1 REIT”).

Shinhan Global Active REIT (A481850) is a listed fund-of-funds REIT that invests in high-quality U.S. real estate funds (USGB, PRISA, USCP).

Investment targets include: △ a fund (USGB) that invests in office assets under long-term leases with U.S. federal and state government agencies; △ the U.S.’s first open-ended core real estate fund (PRISA); and △ a fund (CBRE USCP) that focuses on growth sectors such as U.S. residential, logistics centers, and healthcare.

As of the third quarter of 2024, USGB accounted for the largest share of the portfolio at 56.3%, followed by PRISA at 35.9% and CBRE USCP at 8.4%.

This capital increase is the first step in the previously announced phased capital expansion plan totaling 65 billion won. Following this 30 billion won rights offering, the company plans to conduct an additional 35 billion won rights offering within the year to expand its capital to a total of 65 billion won.

Shinhan Global Active REIT plans to sequentially inject approximately 65 billion won into its underlying REIT, “Shinhan Global No. 1 REIT,” in order to strengthen its dividend-paying capacity.

Decline in Won-Dollar Exchange Rate… Reduced Burden of Currency Hedge Settlement Payments

The funds raised by Shinhan Global No. 1 REIT through the first rights offering (30 billion won) will be used to repay the parent company Shinhan Global Active REIT’s debt and settle foreign exchange hedging obligations. The company plans to fully repay the remaining debt of approximately 18.2 billion won to increase the dividend yield and alleviate investor concerns.

In addition, the REIT plans to allocate approximately 10 to 15 billion won as settlement funds for forward foreign exchange contracts used for currency hedging, which are set to mature in January of next year. The settlement amount for these forward foreign exchange contracts may vary depending on the exchange rate at the time of settlement.

It has been reported that, due to the recent decline in the won-dollar exchange rate, the amount of funds required for currency hedging settlement has decreased compared to initial expectations.

Yoon Young-jin, Department Head (Director) at Shinhan REITs Management, stated, “The structure is designed to cover approximately 10 to 15 billion won based on a won-dollar exchange rate of 1,550 won,” adding, “As the exchange rate has fallen to the 1,460 won range, we expect the amount required for foreign exchange hedging settlements to decrease.”

As the funds allocated to currency hedging decrease, the capital available for investing in domestic preferred shares increases. Shinhan Global Active REIT plans to use the funds remaining after improving its financial structure to invest in new assets.

It plans to invest approximately 30 to 35 billion won in high-quality domestic real estate preferred shares. In this case, the expected annual return is around 6–7%. The industry believes this will allow Shinhan Global Active REIT to enhance its financial stability while also securing funds for dividends.

A real estate investment trust (REIT) industry official stated, “As the burden of foreign exchange hedging settlements has decreased more than expected due to the decline in the exchange rate, the scope for utilizing funds has expanded,” adding, “Since it is now possible to simultaneously reduce debt and secure investment funds, this will have a positive impact on long-term dividend stability.”