ESR Kendall Square is setting the precedent by pioneering new paths for Korean REITs with their listed REIT that boasts a logistics center as its basic asset, a first for Korea, and a great contribution the development of the Korean REITs market.
①With its debut in December, 2020, it was the first-ever logistics center REIT to be listed on the stock market. Since then, a number of listings have incorporated a logistics center, such as Lotte REIT and IGIS Value REIT, and even more REITs pending future listing have similar plans to include logistics centers.
②In particular, ESR Kendall Square REIT has a strong pipeline of high-quality assets already developed or invested by its parent company, ESR Kendall Square. Among currently listed REITs, it can be said that this REIT has the clearest future growth direction. Currently, they continue to promote the incorporation of new assets through a REITs offering.
③There was also a case where foreign investors (CPPIBs), big players in the Korean commercial real estate market, sold their invested assets to the private placement market, listed them without exiting, and kept holding them. This was also a first for Korea. In the future, other foreign investors are likely to create REITs AMCs or listed REITs in the domestic market.
④BlackRock, a global leader in asset management, owns more than 5% of the shares. Global investor interest in Korean REITs has increased.
⑤And, although this has not been discussed much yet, there is one important fact that the REITs industry should pay attention to— IR. ESR Kendall Square paid close attention to IR while preparing its REIT for listing. In particular, they put a lot of effort into reinforcing IR expertise in order to communicate easily and consistently with global institutional investors. The person they recruited to be in charge of IR was Lee Dong-jin. Before joining ESR Kendall Square REIT management, Lee had more than 15 years of experience in equity sales at a foreign securities company. Based on this experience, he was able to promote ESR Kendall Square by directly tapping into global institutions and overseas IR events. For reference, among currently listed REITs, few of their IR managers have the experience in the stock market that Lee has. Instead, most IR managers have real estate experience. As REITs are investment products with characteristics of both stocks and real estate, experience in both fields is important. However, it seems necessary to pay attention to the ESR Kendall Square REIT since domestic REITs have suffered from not understanding the stock market properly.
Joining the FTSE EPRA Nareit Developed Asia Index
Recently, I had an opportunity to talk with Lee, who is in charge of IR at ESR Kendall Square REIT. We talked about what ESR Kendall Square is currently focusing on. Lee said that their main goal is to be included in the FTSE EPRA Nareit Developed Asia Index. In general, when REITs are included in global indices, interest from foreign investors increases, which then impacts supply and demand. Recently, incorporation into global indexes is increasing among Korean REITs. ESR Kendall Square REIT was also incorporated into the MSCI Global Small Cap Index on May 11. However, ESR Kendall Square REIT considers the FTSE EPRA Nareit Developed Asia Index to be its primary goal. While the MSCI Global Small Cap Index is much larger, as the index itself contains more than 40 times more stocks than the FTSE EPRA Nareit Developed Asia Index, a REIT entering the FTSE EPRA Nareit Developed Asia Index would have a greater relative impact due to the index being smaller and more suitable to the type of listing.
It’s also important to remember that so far, the FTSE EPRA Nareit Developed Asia Index has not yet listed any Korean REITs.