REITs Investments for HNWIs & Corporations

A.I.M. has enabled HNWIs (High-Net-Worth Individuals) and corporations to indirectly invest their excess funds in REITs investments by establishing the Aventree Hotel REITs, named “the Korea Value Growth Hotel Number 4 Corporate Restructuring Real Estate Investment Trust” (KVG H-4) in October 2016. Currently most REITs investments are private and closed-end, resembling wholesale finances targeted towards institutional investors.

 

A.I.M. has been continuously striving to open up REITs investments stage by stage to the general public, first by selectively enabling HNWIs to invest capital in REITs, and then by consistently releasing REITs products appropriate to the developing stage of the REITs public market. 

 

REITs are investment products that aim for stable mid-level cash dividends while involving low to mid-level risks. Since basic REITs products are meticulously selected large commercial real estate properties that have stable cash flows, the indirect real estate investments involving these products can be useful. In addition, it also provides the stability of bond investments, because stable cash dividends are distributed according to the predetermined schedules, usually after 6 months. There have been very rare occasions where REITs products resulted in the loss of principals or the target return lower than the fixed deposit market rate. A.I.M.’s REIT investment returns yielded the accumulated yearly average of 8.4%, and the highest yearly average of 16.2%.

 

 

A.I.M. REITs Target Yields (as of 06.01.2020)

A.I.M. REIT’s standard yearly cash distribution rates target approximately 3~5% higher than 5-year government bond rates, although they may differ based on the selection of real estate asset that A.I.M. REIT invests in.

  • Large Commercial Office Building (GFA: 33000㎡ or above / Central Business District around City hall, Tehran and Yeouido):

- Target 3% higher yearly cash returns than those of 5-year government bonds.

  • Upscale hotels with reliable operators (150 keys or more, 3-star or near):

- Target 5% higher yearly cash returns than those of 5-year government bonds.

  • Large commercial retail facilities

- Target 5% higher yearly cash returns than those of 5-year government bonds.

(Note) These standards are subject to change according to external financial market environment and investment conditions.

Critical Economic Variables and Factors for REITs Investments

  • The financial factors that has the greatest impact in REITs investments are fluctuations in the standard interest rate, determined by the Bank of Korea, and the financial market-determined interest rates. Large commercial real estate properties that A.I.M. selects do not fluctuate significantly in investment value unless there are big interest rate changes, but there may be impacts on cash dividend rates due to factors such as increased costs in mortgages. Private REITs, contrary to public REITs, are mid-to-long term investments with investment periods ranging from 3 to 7 years.

  • Professional REITs do not raise large-scale leverage, determined by debt-to-equity ratio, in order to maintain the stability of investments. The current A.I.M. standard debt-to-equity ratios are 50~55%.

  • The economic cycle in Korea, which involves repetitions of overheating and recession, has general impacts on the real estate market. A.I.M. recommends potential investors to especially pay attention to price fluctuations in each subcategories of large commercial real estate market, such as large office market, large logistics facility market, upscale hotel market, etc. Feasibility of the purchase price is one of the most important factors in real estate investments.

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