Mode Tour Co., South Korea`s second-largest tour agency, announced on Thursday it will list its real estate investment trust unit Mode Tour REIT on the country’s main bourse by next month.

It would be the first for a REIT company going public on the Kospi market since K-TOP REIT was listed in 2012, and much attention is paid to whether the fresh initial public offering (IPO) will bring new life to the long-depressed local REIT market. In particular, Mode Tour REIT would be the country’s first hotel and lodge REIT on the exchange.

Mode Tour REIT CEO Jung Sang-man told reporters the company will focus on maximizing profits from synergy with Mode Tour and bolstering its global network following its IPO. The company will use the IPO proceeds to secure 3,000 hotel rooms around the world by 2020 and raise the asset size to up to 500 billion won ($450 million), he added.

Currently, the company owns 410 hotel rooms after purchasing three branches of Stars Hotel - two in Myeongdong and one in Dongtan in Korea. It also plans to acquire a hotel located in Doksan-dong in Seoul.

REIT is an investment vehicle like a mutual fund, allowing both retail and institutional investors to hold shares in real estate ranging from residential buildings, offices to hotels. It often trades on major exchanges as a security.

IPO subscription is available for two days from September 1 with the aim to go public on September 13. A total of 2.35 million shares will be issued at an initial offering price of 6,000 won per share, a 32.75 percent discount from original appraisal under the Real Estate Investment Company Act. It is expected to draw about 14.1 billion in the IPO.

Mode Tour REIT, a Mode Tour subsidiary that was founded in January 2014, generated 3 billion won in operating income last year.

By Park Yoon-gu

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