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

The REIT & Infra weighted average return (market-cap basis) was 1.39% in August; of the sector contributions (each sector's share of the weighted average return), Office's 1.13pp at a 3.38% return was larger than that of Retail (7.20% return, 0.78pp), the sector with the highest return, and Infrastructure's -0.68pp at a -1.57% return was the lowest

Office rose 3.38% and, as the second-largest sector at 33.5% of market capitalisation, contributed 1.13pp

Of Office's monthly returns from August 2025 to August 2026, 3.38% was the second-highest and more than twice the median of 1.58%

Infrastructure, the largest sector at 43.3% of market capitalisation, fell 1.57% and contributed -0.68pp

Retail had the highest return at 7.20% but was 10.8% of market capitalisation, so it contributed only 0.78pp

Over the three months from June to August, only three of the six sectors had positive cumulative returns: Office, Diversified and Retail

The three positive sectors were Office at 3.2%, Diversified (the single name NH All One REIT) at 1.0% and Retail at 0.6%

The three negative sectors were Residential (the single name IGIS Residence REIT) at -0.9%, Infrastructure at -6.5% and Industrial at -12.2%

In August the stocks with the largest stock contributions (each stock's share of its sector's return) were Lotte REIT in Retail, Hanwha REIT in Office, ESR Kendall Square REIT in Industrial and Macquarie Korea Infrastructure Fund in Infrastructure

Retail's 7.20% breaks down into stock contributions of 6.09pp from Lotte REIT, 1.06pp from E KOCREF CR-REIT and 0.05pp from the other two names, so Lotte REIT accounts for most of it

Lotte REIT rose 8.85% (68.8% of the sector) and E KOCREF CR-REIT rose 8.63% (12.3% of the sector)

Office's 3.38% breaks down into stock contributions of 0.98pp from Hanwha REIT, the largest, and 2.40pp from the other nine names, and seven of its ten names rose, so the gain was spread across names

Hanwha REIT rose 5.11% (19.2% of the sector); SK REIT, one of the other nine, fell 0.36% (35.8% of the sector, the largest) for -0.13pp

Industrial's 0.52% breaks down into stock contributions of -2.73pp from ESR Kendall Square REIT and 3.25pp from the other four names, so the rise of the others outweighed the fall of the largest name

ESR Kendall Square REIT fell 5.02% (54.4% of the sector)

The other four contributed 1.49pp from Koramco Life Infra REIT (up 5.50%), 1.40pp from D&D Platform REIT (up 11.28%), 0.63pp from Mastern Premier REIT (up 36.19%) and -0.27pp from Mirae Asset Global REIT (down 6.13%)

Infrastructure's -1.57% breaks down into stock contributions of -1.55pp from Macquarie Korea Infrastructure Fund and -0.02pp from KB Balhae Infrastructure Fund

Macquarie Korea Infrastructure Fund fell 1.98% (78.5% of the sector) and KB Balhae Infrastructure Fund fell 0.09% (21.5% of the sector)

The Bank of Korea Monetary Policy Board raised the base rate from 2.75% to 3.00% on 27 August, a 25bp increase that, with the 25bp increase in July, brings the total to 50bp in two months

The vote was 6 to 1, and unlike the unanimous July vote the dissent was in favour of keeping the base rate at 2.75%

It judged that pre-emptive action to stop inflationary pressure spreading is important

It named growing household debt and rising capital-region house prices as financial stability risks

The Bank raised its growth projection to 3.3% this year and 2.9% next year and its core inflation projection to 2.5% for both years, against May, and kept its headline inflation projection

The May projections were growth of 2.6% this year and 2.1% next year, and core inflation of 2.4% this year and 2.3% next year

Its headline inflation projection is unchanged from May at 2.7% for this year and 2.3% for next year

The Board said in its August statement, as in July, that it would decide the timing and pace of any further increase, signalling that further increases are possible

Speaking at the Jackson Hole economic policy symposium on 28 August, Fed Chairman Kevin M. Warsh named prices the Fed's top priority, said he would be hard pressed to call financial conditions restrictive, and said forward guidance (advance signalling of the rate path) would be used only in a limited way in normal times

As grounds for putting prices first, he said inflation in the personal consumption expenditures (PCE) price index, the measure behind the Fed's 2% target, is above target

The 12-month rate is 3.7% and the six-month rate 4.1%

He said responsibility for more than five years of elevated inflation sits with the Fed

As grounds for financial conditions not being restrictive, he said corporate bond and leveraged loan spreads are historically low and that issuance has been strong this year

On the same point he cited banks reporting easier standards on commercial and industrial loans in the July Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS)

As the reason for limiting forward guidance, he described the practice, adopted during the financial crisis, as having 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 in advance how rates would respond to the data (the reaction function), a stand-in for forward guidance, saying understanding of the economy is not precise enough for that

Governor Lisa D. Cook said in Anchorage on 5 August that she sees the inflation risk as larger than the employment risk, but that holding the policy rate is appropriate at this point

She said she is prepared to raise rates if signs of disinflation do not appear soon

For holding she cited three factors that bring inflation down

A base effect: the price effect of last year's tariff increases is dropping out of the 12-month comparison

Many expect oil prices to fall toward year-end

Goods-price pressure from the AI build-out may ease as supply chains adjust

The PCE price index is a different index from the US consumer and producer price readings below.

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

The 2026 tax reform package that the Ministry of Economy and Finance announced on 3 August extends the 9% separate-taxation treatment of public real estate fund and REIT dividends, moves it to a dedicated account that applies it automatically, and excludes funds and REITs investing in overseas real estate, and also extends two tax breaks of corporate restructuring REITs (CR-REITs)

The separate-taxation treatment's sunset changes from investments made by 31 December 2026 to income arising by 31 December 2029, a three-year extension (from an investment-time basis to an income-time basis)

The treatment moves from applying directly through a securities firm to joining a dedicated account

No three-year holding requirement applies once the dedicated account is joined

The dedicated account applies to accounts newly joined from 1 January 2027, and those who invested by 31 December 2026 may choose between the dedicated account and the old rules (three-year holding requirement)

Funds and REITs investing in overseas real estate are excluded from the treatment

Detailed criteria are delegated to a presidential decree

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

The acquisition deadline of two tax breaks that CR-REITs receive when they acquire unsold post-completion housing outside the capital region is extended by one year, from 31 December 2026 to 31 December 2027

The breaks are the exclusion from additional corporate tax (Corporate Tax Act Enforcement Decree) and the comprehensive real estate tax aggregation exclusion (Comprehensive Real Estate Tax Act Enforcement Decree)

The aggregation exclusion applies for five years after acquisition

The conditions of the corporate tax break, housing outside the capital region and sale within five years of acquisition, are unchanged

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