Affiliated real estate trust companies have been in the red for the third consecutive year, with the four major financial holdings continuing their record-high performance. Responsible completion and borrowing projects, which were increased to target high fees during the real estate boom, have returned to boomerang in line with the downturn in the construction industry.
According to KB, Shinhan, Hana, and Woori on the 8th, the total net profit and loss of each holding real estate trust subsidiary in the first to third quarters of this year was 130.3 billion won. These companies, which had a surplus of 220 billion won every year during the same period between 2021 and 2023, lost for the third year following a deficit of 1903 billion won in 2024 and 142.6 billion won last year.
KB Real Estate Trust’s loss was the largest at 149.9 billion won this year. It is more than eight times higher than the same period last year (17.9 billion won). Hana Asset Trust lost 36.4 billion won in the third quarter alone, turning into a cumulative deficit of 29.6 billion won. Shinhan Asset Trust (31.3 billion won) and Woori Asset Trust (17.9 billion won) returned to the black after reflecting large-scale losses in 2024 and last year, respectively.
The root of the loss is a responsible quasi-public land trust. If the construction company does not complete the construction within the deadline, the trust company is responsible for it. As construction companies were shaken by local unsold apartments and rising construction costs, there was an increase in the number of cases to pay damages to loan financial companies. For example, KB Real Estate Trust has passed the deadline for 11 out of 12 responsible completion projects. The balance of project financing (PF) at these workplaces amounts to 805.1 billion won. Although the construction was completed, loan financial companies filed 15 lawsuits (496.5 billion won in litigation value) at eight of them.
Insolvency is also piling up. The average ratio of fixed assets of the four companies rose from 77.5% at the end of last year to 80.4% at the end of June this year. Shinhan Asset Trust’s fixed loans increased from 16.7 billion won at the end of 2021 to 1.533 trillion won at the end of September this year.
[Reporter Park Changyoung]
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