Korean retail conglomerate E-Land Group faced with liquidity crunch and further downgrades in its credit rating is mulling the option of raising funds through a publicly-trading real estate investment trust (REIT) with its lucrative properties worth 1 trillion won ($870 million) as underlying assets.

According to investment bank sources, E-Land will next week invite securities companies to choose an underwriter for its REIT initial public offering (IPO). The REIT the group eyes for an IPO is KOCREF No. 6, a corporate restructuring real estate managing fund run by the country’s largest real estate investment company KORAMCO REITs & Trust. Three buildings of E-Land’s New Core Premium outlets are already under its purchase. The group will add other property assets held by its hotel unit and additional buildings of New Core outlets to the trust portfolio.

A REIT is a company dedicated to owning physical real estate or loaning funds to others for real estate purchases. It returns all of it taxable income to its shareholders, allowing both institutional and retail investors invest in real estate properties without the risk and hassle of making individual purchases and offering better returns in dividends when interest rates are low. The IPO of the REIT with expanded E-Land asset portfolio is expected for November with dividend payout offered at 6 percent to 7 percent per annum.

E-Land Park, the Group’s restaurant and leisure unit, runs three Kensington Hotel chains and 10 Kensington Resorts in major tourist spots such as Jeju, Seorak, and Gyeongju and a ski resort Bearstown in Pocheon, Gyeonggi Province. The group’s leisure business is known to be the largest in the local industry in terms of the number of rooms of the hotel and resort chains.

On the retail front, it operates New Core Outlet, 2001 Outlet, NC Department Store and DongA Department Store. The combined book value of those buildings amounted to 346.4 billion won as of late 2015.

E-Land hopes to raise up to 1 trillion won from the public offering of the REIT with its underlying assets.

The group has been exploring various means to combat its liquidity crunch, offering to sell big-box chain Kim’s Club operation and New Core premise in southern Seoul and pursuing pre-IPO placement ahead of going public in China. Local rating firm NICE questioning the group’s affordability to its debt obligations from its deteriorating retail operations at home and China maintained that E-Land needs at least 1.6 trillion won solve its financial problems.

By Kim Hyo-hye and Chun Gyung-woon

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