“Credit Checkpoint” is a column that assesses the credit risk of companies preparing to issue corporate bonds by examining their financial structure and cash flow. It evaluates a company’s short- and medium-term financial stability by focusing not only on the figures in the financial statements but also on the quality and sustainability of its cash flow. We highlight key financial indicators and potential risk factors to help corporate bond investors and market participants assess a company’s creditworthiness from a more comprehensive perspective.<Editor’s Note>

[Edaily Marketin LEE GEON-EOM Reporter] Hanwha Real Estate Investment Trust (Hanwha REIT) is showing a marked improvement in performance, driven by stable rental income. However, as debt levels have risen alongside the acquisition of large-scale new assets, managing financial soundness and containing financing costs have emerged as key challenges moving forward.

According to the financial investment industry on the 27th, Hanwha REIT will conduct a bookbuilding process on the 28th for the issuance of 200 billion won in corporate bonds.

On the surface, Hanwha REIT appears to be showing a clear trend of improving performance. Revenue (operating income) for the 9th fiscal period (November 2025–April 2026), as recently disclosed, stood at 54.3 billion won, a 7.5% increase from 50.4 billion won in the same period last year. This growth was supported by steady increases in both rental income and management fees. During the same period, operating profit rose 10.8% to 34.3 billion won, while net income surged 61.3% to 17.4 billion won.

The particularly sharp increase in net income was driven by a reduction in financial expenses. Financial expenses for the 9th fiscal period totaled 16.9 billion won, a 16.3% decrease compared to the same period last year (20.2 billion won). This positive outcome stemmed from the company’s restructuring of its debt portfolio to rely more on corporate bonds—which have relatively lower funding costs—including the repayment of long-term debt (91.1 billion won) using funds raised from a new 110 billion won corporate bond issuance.

As a result, the ratio of financial expenses to EBITDA—a key indicator of interest-paying capacity—improved from 1.8 times in the 7th fiscal period to 2.4 times in the 9th fiscal period, demonstrating the company’s growing financial resilience.

The key challenge moving forward is how to mitigate the impact of a sharp increase in debt resulting from the acquisition of new assets. Last June, Hanwha REIT acquired the Orange Center in Sunhwa-dong, Jung-gu, Seoul, for 350 billion won, taking the bold step of financing the entire massive purchase price through debt.

Total debt, which stood at 803.4 billion won as of the end of April this year, is estimated to surge to 1.1681 trillion won following the acquisition of the Orange Center. Even accounting for the increase in total assets, the debt dependency ratio—which was 51.9%—is expected to jump to around 61%, and the debt-to-asset ratio—which was 124.5%—is projected to soar to around 178%.

Compounding this concern is the fact that variable-rate debt accounts for 69.1% of total debt, leaving the company vulnerable to fluctuations in market interest rates. If this coincides with a rising funding environment, there is a high likelihood that financial costs will snowball once again due to the successive expansion of debt.

While the market views Hanwha REIT’s aggressive expansion of office assets and other forms of scale growth positively, some observers point out that the robustness of its fundamentals is now being put to the test.

Lee Eun-mi, a senior researcher at NICE Credit Rating, stated, “When new assets were added in June 2026, they were fully financed through borrowing, resulting in a significant increase in the debt portfolio.” She added, “With market interest rates rising recently, the proportion of floating-rate debt is somewhat high, and as net debt has increased, the burden of financing costs is likely to rise again.”