Homeplus: Reit idea, wrong size

South Korea’s Homeplus Stores whipped the market up into a state of excitement over the last month as it lined up a real estate investment trust (Reit) the likes of which the country had never seen. Even more tantalising was the pipeline of large companies considering Reits of their own if Homeplus's offering went well. But it aimed too high and had to pull the deal, wrecking the party before it started.

  • By Jonathan Breen
  • 19 Mar 2019
Email a colleague
Request a PDF

The company, backed by Asian private equity firm MBK Partners, was hoping to list a Reit of its supermarket properties for up to W1.73tr ($1.5bn). That was a hefty sum for a market that has seen only a handful of publicly listed Reits, most floating for well below $100m, according to Dealogic data.

The deal was seen as an opening up of the Korean Reit market and it did seem that its time had come when investors were receptive during pre-marketing.

Korean IPOs rely heavily on domestic investors, with an initial 40% of each deal reserved for them. Homeplus's syndicate expected around $500m from local funds. 

But its ambition extended way beyond the locals, targeting investors who usually focused on Singapore Reits, as well as large Japanese investors. To engage those buyers the deal needed to be big enough to show up on their radars.

But vying for all that attention proved too much, too soon for a nascent market like Korea’s and the deal was pulled.

MBK and Homeplus can nurse their wounds for now. But whether they knew it or not, other large issuers were lining up to follow them into the market. Among them were Korean retail companies e-mart and Lotte. No doubt they have also now taken a step back from pursuing their own Reit plans as a result of Homeplus's fate.

Homeplus has said it will return. When it does, local demand should be just as high. But the issuer must take a more conservative approach to its size ambitions and its engagement with international investors. It will be hard to try such a large Reit again, at least for a while.

It is also worth noting that Homeplus need not be the first name to come. Bankers were dejected about the impact of its failure but at least Homeplus has done its peers a service by showing them how high they can fly before they get too close to the sun.

Lotte, e-mart and their peers are not small fry issuers. With a well-marketed roadshow and sensible ambitions, there is no reason they cannot grow the Korean Reit market.

  • By Jonathan Breen
  • 19 Mar 2019

Panda Bonds Top Arrangers

Rank Arranger Share % by Volume
1 China Merchants Securities Co 26.40
2 Industrial and Commercial Bank of China (ICBC) 20.00
3 China Securities 13.33
4 Agricultural Bank of China (ABC) 12.00
5 Bank of China (BOC) 11.33

Bookrunners of Asia-Pac (ex-Japan) ECM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 CITIC Securities 6,126.98 28 8.97%
2 Goldman Sachs 5,994.79 21 8.78%
3 Morgan Stanley 4,359.35 28 6.38%
4 China International Capital Corp Ltd 3,925.11 17 5.75%
5 UBS 3,727.37 21 5.46%

Bookrunners of Asia Pacific (ex-Japan) G3 DCM

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 12,820.23 113 8.54%
2 JPMorgan 9,032.10 54 6.01%
3 Citi 8,900.47 66 5.93%
4 Credit Suisse 5,896.22 44 3.93%
5 Standard Chartered Bank 5,747.27 53 3.83%

Asian polls & awards

  • GlobalCapital Asia capital markets awards 2018: Investment banks

    In the fourth and final instalment of GlobalCapital Asia’s capital markets awards announcements, find out the Best Asian Investment Bank and the Best Investment Bank in the region for 2018.

  • GlobalCapital Asia capital markets awards 2018: Bonds

    In part three of our results announcements, we reveal the winning bond deals across a variety of categories. In addition, we also name the Best G3 Bond House, Best Local Currency Bond House, Best High Yield Bond House and the debut winner of the Best House for SRI Financing.

  • GlobalCapital Asia capital markets awards 2018: Equities

    In part two of our results announcements, we reveal the winning equity deals and banks, including the Best Follow-on/Accelerated Bookbuild, Best Equity-Linked Deal, Best IPO, Best ECM Deal and Best ECM House.

  • GlobalCapital Asia capital markets awards 2018: Loans

    GlobalCapital Asia has spent the last two months talking to banks and their clients in a bid to determine the most impressive capital markets transactions and advisers across Asia ex-Japan in 2018. We are pleased to begin our awards announcements in the loan market.

  • GlobalRMB awards: Most impressive issuers, best law firm

    In this third part of the GlobalRMB awards, we present our reasons for choosing the best issuers in the FIG, corporate and SSA categories — and praise the strong performance of one well-known foreign law firm.