Seoul City advances sharing urban development benefits with citizens by introducing "Seoul Co-Travel REITs"

Seoul City has decided to introduce the “Seoul Co-Travel REITs,” which means advancing a new model in which citizens participate as investors, rather than the long-standing urban development structure centered on public and private sector operators.

On the 22nd, Seoul City announced its plan to introduce the Seoul Co-Travel REITs. REITs are a real estate investment trust structure in which, after raising funds from many investors to invest in real estate, rental income or development profits are distributed. The core of this model is that the initial development phase—where risks are relatively high—is designed to be borne by the public sector, while in the operating phase after the building is completed, when the income stream is relatively stable, citizens participate as shareholders. The concept is to reduce uncertainty in the early development stage and share the profits generated thereafter with citizens.

The project structure will mainly be carried out through a public participation type, in which Seoul City and the Seoul Housing and Urban Development Corporation (SH) hold more than 51% of the shares. Based on this, Seoul City has proposed a target of stable dividends with an annualized minimum level of 6%. The scale of citizens’ subscription is set at around 30% of the REITs’ capital, and the actual regions eligible for the public offering and the fundraising range will differ depending on the size and nature of each project. This is a form that keeps operational control with the public sector while opening up investment opportunities to citizens, and it differs from the general nature of high-risk development projects.

Seoul City is considering applying the Seoul Co-Travel REITs as pilot cases first in the comprehensive development of the Yongsan International Business District B9 site led by the public sector, and in private investment projects at the Sillim Fire Station site. Yongsan International Business District is one of Seoul’s representative large-scale development projects, and the Sillim Fire Station site is also drawing attention due to its location and business potential. Seoul City believes that if citizens’ funds are connected to these projects, a virtuous cycle can be formed in which citizens directly invest in Seoul’s growth and receive dividends based on its results. This initiative also means going beyond mere fiscal financing, aiming to institutionalize a “citizen-participation development” system.

The city plans to establish, within this year, detailed project plans for each pilot project, and to set detailed operating standards such as the scope of citizens’ public subscriptions, the size of the public offering, and measures to protect investors. Although public development has the advantage of relatively greater stability, if it is to be launched as an investment product for citizens, mechanisms must be in place at the same time, such as transparency of the profit structure, explanations of potential losses, and clear dividend standards. Kim Yong-hak, Seoul’s Future Space Planning Officer, says that the Seoul Co-Travel REITs are a new attempt to share development benefits with citizens rather than allowing a few to monopolize them. This trend shows that in the future, Seoul’s large-scale public development projects may extend beyond simply supplying infrastructure and expand toward sharing profits with citizens.