'1 Trillion Won Fund' PF Development Anchor REIT Draws Applications from 50; First Investment Expected Next Month

[Financial News] Fifty applicants have applied for investment in the PF (project financing) Development Anchor REIT, established by the government with 1 trillion won, it has been confirmed. The Ministry of Land, Infrastructure and Transport plans to select the first investment recipient and disburse funds as early as the beginning of next month. The aim is to open up blocked PF funding channels, attract private development projects and speed up housing supply. However, concerns have also been raised that small and midsize developers may struggle to meet the bar, as screening standards have been raised in the name of advancing PF.
According to Financial News reporting on the 20th, 50 applicants had submitted applications to the PF Development Anchor REIT by that day, four months after applications opened in June. The Ministry of Land, Infrastructure and Transport is reviewing all the proposed project sites and plans to select the first site for investment and disburse funds as early as the beginning of next month. Since private funds will also be involved, it says it will prioritize careful screening over speed.
The PF Development Anchor REIT was introduced to attract private capital by having the public sector invest first in promising development sites facing funding difficulties. Developers take out bridge loans (short-term loans for land purchases) when buying land. However, concerns over PF defaults grew after the 2022 Legoland crisis, and new bridge loans dried up as financial authorities tightened risk management. Projects unable to secure bridge loans could not proceed to the permitting stage, contributing to a contraction in housing supply and a downturn in the construction industry. The anchor REIT provides financing at below-market rates during the land-acquisition stage, then recovers its investment when a project moves into full-scale PF financing and reinvests the funds in other sites.
The REITs have a total value of 1.043 trillion won. Of that, 521.5 billion won was contributed by the Korea Land and Housing Corporation (LH, 200 billion won) and private institutional investors and others (321.5 billion won), while the remaining 521.5 billion won was raised through corporate bonds guaranteed by the Korea Housing & Urban Guarantee Corporation (HUG). There are two REITs: KORAMCO Development Anchor REIT, managed by KORAMCO REITs Management and Trust, and K1 Development Anchor REIT, managed by Korea Land Trust. The investment limit for each site is 10 billion to 100 billion won, capped at 50% of the land purchase cost. The interest rate is set at 2.5–3 percentage points above the yield on three-year AAA-rated public corporation bonds. The funds can be used not only for new bridge loans but also to refinance existing ones. The operating period is five years and can be extended to a maximum of 10 years.
The most notable shift is the move toward a focus on “housing.” Currently, at least 50% of the investment must go to residential projects such as apartment complexes, mixed-use residential and commercial complexes, and officetels. The government plans to raise this share to 70% under its “Plan to Rapidly Supply Housing to Stabilize the Jeonse, Monthly Rental and Home-Sales Markets” (Aug. 13 measures), announced last August. The share allocated to nonresidential projects such as offices, hotels and AI data centers will be reduced from less than 50% to less than 30%. Next year, the government will also establish a new 400-billion-won housing-only anchor REIT that will invest exclusively in housing projects in the Seoul metropolitan area. Its goal is to support the start of construction on about 10,000 homes over five years by reinvesting at 18-month intervals.
The screening standards also reflect the government’s determination to change the PF structure. In South Korea, developers’ equity in PF projects has stood at around 5%, leaving them reliant on high-interest loans from the land-acquisition stage onward. As a result, a disruption in funding at one site could easily trigger a chain of defaults. In its November 2024 plan to improve the PF system, the government said it would raise the equity ratio to 20%, and incorporated that target into the anchor REIT’s investment requirements.
There are four main screening criteria: whether the land price is reasonable in light of appraised values and actual transaction examples, and the development plan aligns with demand; whether 100% of the land has been secured; whether project plan approval can be obtained within 12 months (18 months for projects involving changes to urban plans); and whether equity is at least 20% of the land cost. An application cannot even be screened if it fails to meet any one of these criteria.
Industry observers say the structure favors only large developers with strong financial resources. Small and midsize developers may find it difficult to secure all the land and meet the 20% equity requirement. The government has eased the bar by counting loans, in-kind contributions and interest expenses (up to five years’ worth), in addition to paid-in capital, as equity, but concerns remain. “The method of calculating equity has become more flexible, but ultimately this is a project that favors large developers,” one industry official said. “There need to be more opportunities for small and midsize developers.”
[email protected] Jeong Gyeong-su, Lee Jong-bae Reporter