Lotte REIT readying $356 mn IPO in Korea in late October

South Korea’s Lotte REIT is readying to go public in what would be the country’s largest real estate investment trust stock by market cap.

The company said on Friday it has filed administrative documents for an initial public offering (IPO) process. Under the plan, about 86 million shares will be offered at the end of October with an IPO price band set between 4,750 won and 5,000 won apiece. The company would be able to raise up to 430 billion won ($355.5 million) from the IPO, of which would be spent on real estate asset purchases from Lotte Shopping, the operator of the country’s largest department store chain.

Book-building is set for Sept. 23-Oct. 2. Public subscription is scheduled on Oct. 8, 10 and 11. Korea Investment & Securities, HSBC (Seoul branch) and Nomura Financial Investment are co-underwriters.

Lotte REIT, the industry’s youngest real estate investment trust, was formed in March and granted a business license in May. It has a buy and lease back deal for four department stores, four discount stores and two retail outlets owned by Lotte Shopping. The total floor size of its target assets is 638,779 square meters and their appraised value is 1.49 trillion won.

The real estate investment trust said it will pay shareholders stable cash flows based on the fixed monthly rent from Lotte Shopping under a long-term lease agreement. A target dividend yield is 6.3 to 6.6 percent in 2020.

Lotte Shopping will hold a 50 percent stake in Lotte REIT after the IPO, while Lotte REIT’s asset management will be handled by Lotte AMC. Lotte Shopping will provide assured property to Lotte REIT as an anchor investor and channel additional property to ensure Lotte REIT’s stable growth.

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