[Edaily Marketin KIM SUNG-SOO Reporter] Shinhan West TND REIT now faces two challenges: “reducing financial costs” and “safeguarding rental income.” The REIT is currently considering early refinancing ahead of the maturity of a 386 billion won loan. This move aims to lower the interest rate on the loan and thereby reduce the interest burden.

Furthermore, the REIT’s future dividend capacity may depend on how the vacancy issue at Square One, a mixed-use shopping mall in Incheon, is resolved. Seobu T&D has agreed to enter into a guaranteed lease agreement to fill the vacancies created by Homeplus’s departure; the terms of this agreement and the success in attracting new tenants are expected to determine the future trajectory of dividends.

Square One Loan Matures Next Month… Vacancy Burden Following Homeplus’s Departure

According to the financial investment industry on the 19th

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Shinhan Seobu T&D REIT has been considering the early refinancing of its held assets to reduce interest expenses.

Shinhan Seobu T&D REIT was established through a collaboration between its sponsor, the real estate development company Seobu T&D, and Shinhan REIT Management, the REIT’s asset management company (AMC). Shinhan REIT Management serves as the asset management company (AMC).

The REIT holds a portfolio that includes hotels, retail properties, and office buildings. Key investment assets include: △ the mixed-use shopping mall “Incheon Square One”; △ the 5-star hotel “Grand Mercure Ambassador Hotel & Residence Seoul Yongsan” (Yongsan Grand Mercure); △ the office, hotel, and retail complex “Gwanghwamun G Tower”; and △ the 3-star hotel “Shilla Stay Mapo.”

Shinhan West TND REIT is currently reviewing the early refinancing of loans totaling 386 billion won. These include: △ a 193 billion won senior loan for Incheon Square One; △ an 87 billion won senior loan and a 14 billion won mezzanine loan for Shilla Stay Mapo; and △ a 92 billion won senior loan for Yongsan Grand Mercure.

The loan with the earliest maturity date is the Square One loan. The 193 billion won senior loan, which was secured from institutions such as the Korea Development Bank, matures on the 27th of next month. The all-in interest rate is 4.59%. Shinhan Seobu TND REIT is currently in discussions regarding the refinancing of this loan.

In the case of Shilla Stay Mapo, a senior loan of 87 billion won and a mezzanine loan of 14 billion won—with interest rates of 4.5% and 5.9%, respectively—are set to mature on May 29 of next year. The 92 billion won senior loan for the Yongsan Grand Mercure, with an interest rate of 4.9%, is set to mature on June 2 of next year.

Seobu T&D’s Lease Responsibility… Dividend Sources May Vary Depending on Conditions

For Incheon Square One, securing rental income has also become critical. This is because a vacancy has arisen after Homeplus and Shinhan Seobu T&D REIT, which had been operating on the first basement level, terminated their lease agreements.

Shinhan Seobu T&D REIT has secured approximately 3 billion won in rent from Homeplus through February of next year, but will face the burden of vacancy thereafter.

Seobu T&D, the sponsor of Shinhan Seobu T&D REIT, plans to enter into a guaranteed lease agreement to fill this gap. Under a guaranteed lease, Seobu T&D assumes responsibility for rent payments, thereby bearing part of the vacancy risk.

However, the terms of the agreement are crucial. If Seobu T&D demands a rent lower than the existing Homeplus rent in exchange for bearing the vacancy risk, the REIT’s rental income and dividend funds could decrease. A board meeting and an extraordinary general meeting of shareholders are scheduled to be held in mid-next month to finalize the lease agreement with Seobu T&D and determine the specific terms. The schedule is still being discussed.

Consequently, Seobu T&D now faces the challenge of securing new tenants to stabilize Square One’s rental income. In particular, the key will be how quickly it can attract high-traffic tenants capable of drawing in visitors.

Until now, uncertainty regarding the timing of the termination of the lease agreement with Homeplus and the date of vacating the premises had imposed some constraints on internal staff in implementing their MD (merchandising) strategies. However, now that the termination of the contract with Homeplus has been finalized and this uncertainty has been resolved, the company is expected to accelerate its efforts to attract new tenants.

A financial investment industry official stated, “The current challenge for Shinhan West TND REIT is to lower interest rates to reduce the interest burden while maintaining rental income,” adding, “Even if early refinancing leads to reduced financial costs, dividend capacity could be limited if Square One’s rental income falls short of expectations.”