K-REITs & Infrastructure Monthly — Vol.003 (2026-08)

□ The K-REIT & Infrastructure total return index fell 0.04% in August and stayed roughly flat. Office's gain offset most of Infrastructure's fall

○ Infrastructure, 43.3% of market capitalisation, fell 3.91% and took 1.69pp off the index, while Office, at 36.3%, rose 4.02% and added 1.46pp

- Macquarie Korea Infrastructure fell 4.80% and makes up 78.5% of its sector. The sector has now fallen four months running, down 9.9% over three months

○ Each of the other four sectors contributed less than 1pp

□ The 16.9pp gap between Retail (6.41%) and Industrial (-10.44%) was wider than in any of the previous 12 months

○ The median over those months was 8.3pp

○ Industrial's fall came from ESR Kendall Square. It is 89.8% of the sector's market capitalisation and fell 12.28%, while the other two names returned 5.84% on a market-cap weighted basis

□ Office rose even without Hanwha REIT

○ Hanwha REIT's 14.66% gain contributed the most, but the other 12 names also returned 1.72% on a market-cap weighted basis and 8 of the 13 rose

□ Among the names that moved each sector's return most, up or down, ESR Kendall Square, Koramco Life Infra and Hanwha REIT paid more per share than their AFFO per share for their latest reporting period (April to May 2026)

○ Dividend cover, AFFO per share over dividend per share, was 0.53x for ESR Kendall Square (Industrial), 0.68x for Koramco Life Infra (Diversified) and 0.98x for Hanwha REIT (Office)

□ On the same basis Igis Residence (Residential) at 1.49x and Lotte REIT (Retail) at 1.10x paid within their AFFO per share for their latest period (December 2025)

□ The Monetary Policy Board raised the base rate from 2.75% to 3.00% on 27 August, a 25bp increase

○ It judged that pre-emptive action to stop inflationary pressure spreading was important, and that financial stability risk still warranted attention

- Under financial stability it named rising house prices in the capital region and the widening increase in household debt

○ The vote was 6 to 1, with one dissent where the July hike had been unanimous

□ It raised its growth and core inflation projections and left the headline inflation projection unchanged

○ Growth for this year and next is now put at 3.3% and 2.9%, above the May projections of 2.6% and 2.1%

○ Core inflation is put at 2.5% for both years, up from 2.4% and 2.3%

○ Headline inflation is still projected at 2.7% and 2.3%, as in May

□ The Board said it would decide the timing and pace of any further increase while monitoring inflation, growth and financial stability

□ Two consecutive hikes have taken the base rate from 2.50% to 3.00%, 0.50pp in all. Floating-rate borrowings pay more interest at their next rate reset to the extent the hikes pass into loan benchmarks such as CD rates

□ The 3-year KTB, which bears on refinancing rates for maturing borrowings, rose 0.08pp to 3.84%, more than the 10-year the asset discount rate is set off, which rose 0.05pp to 4.31%

□ Speaking at the Jackson Hole economic policy symposium on 28 August, Fed Chairman Warsh put prices first, said broad financial conditions were hard to call restrictive, and said he would change the practice of forward guidance

○ He named prices the Fed's predominant focus

- He pointed to PCE inflation, the measure behind the Fed's 2% target, of 3.7% over 12 months and 4.1% over six

- He said responsibility for 65 months of elevated inflation sits with the central bank

○ He said he would be hard pressed to call broad financial conditions restrictive

- Corporate bond and leveraged loan spreads are near the low end of their historical ranges, alongside heavy issuance

- Banks reported easier standards on commercial and industrial loans in the July Senior Loan Officer Opinion Survey (SLOOS)

- He noted separately that housing and agriculture are showing strains

○ He said he intends to change the practice of forward guidance itself

- He described it as a crisis-era measure that should be limited in normal times and has overstayed its welcome

- He said quasi-commitments on the rate path narrow the Fed's own freedom to decide

- He was equally cool on publishing a reaction function tied to a particular rule, saying understanding of the economy is not precise enough for that

□ On the day of the speech the 2-year Treasury yield rose 0.14pp from the previous session to 4.34%, and the 10-year 0.06pp to 4.73%

As of the latest published month (2026-07).

□ Governor Lisa Cook said in Anchorage on 5 August that she sees the inflation risk as larger than the employment risk, but that holding is appropriate for now

○ With inflation above target for more than five years, she said she is prepared to raise rates if necessary

○ For holding she cited last year's tariff pass-through dropping out of the 12-month rate

○ She added that many forecasters expect oil to come down by year-end, and that goods-price pressure from the AI build-out may ease as supply chains adjust

□ In its 2026 tax reform package of 3 August, the Ministry of Economy and Finance redesigned the separate-taxation treatment of public REIT dividends and extended the deadlines on two tax breaks for CR-REITs

○ The separate-taxation treatment for public REIT and public real estate fund dividends (Restriction of Special Taxation Act Article 87-7) moves to a dedicated account, and investors who join one are no longer bound by the three-year holding requirement

- Instead of applying through a securities firm, investors get the treatment automatically once they join the account

- The new rules apply to accounts joined from 1 January 2027; investments made by 31 December 2026 can either join a dedicated account and take the new rules or stay on the old rules with the three-year holding period

○ The treatment's sunset moves from investments made by 31 December 2026 to income arising by 31 December 2029, in effect three more years

○ Funds and REITs investing in overseas real estate are newly excluded

○ The 9% separate tax rate and the 50 million won per-investor cap are unchanged

○ For unsold post-completion housing outside the capital region acquired by CR-REITs, the acquisition deadline for the corporate tax and comprehensive real estate tax breaks moves from 31 December 2026 to 31 December 2027

- The two breaks are the exemption from additional corporate tax (Corporate Tax Act Enforcement Decree Article 92-2(2)) and the comprehensive real estate tax aggregate exclusion (Comprehensive Real Estate Tax Act Enforcement Decree Article 4(1))

- The stated reasons are balanced regional development and support for housing markets outside the capital region