KB부동산신탁

What is a Collateral Trust?

Trust products for borrowing money using real estate, such as land and buildings, as collateral.

Structure of the Collateral Trust

The trust company receives real estate from a property owner through a trust agreement and manages to maintain and preserve the collateral value of the trust property for a certain period of time, and then returns the trust property to the beneficiary when the debt is satisfied.
The trust company, upon the request of the trustor and the beneficiary, issues a priority beneficiary certificate to the priority beneficiary in order to indicate the priority rights of the lending institutions or others.
In the event of default, the trust company will liquidate the trust property and use the proceeds from the sale to repay the debtor's debt. After repayment, any remaining proceeds will be delivered to the beneficiary.

※Trust fee criteria

Collateral remuneration: Priority beneficiary certificate amount X fee rate (negotiated with the trustor or beneficiary).
Liquidation and disposal fee: Disposal amount X fee rate (4/1,000 ~ 8/1,000).
The detailed charges are disclosed on our website (http://www.kbret.co.kr).

Benefits of Collateral Trust

1Cost savings compared to the establishment of the right to collateral security.
- From July 1, 2011, the cost of establishing a mortgage (the cost of securing the collateral) is borne by the bank.
- If the trust fee is set lower compared to the mortgage establishment cost, the bank's costs are reduced accordingly.
2Collateral value excellence
- In the event the trustor undergoes rehabilitation or bankruptcy, the independence of the trust property (exclusion from bankruptcy estate) allows for quicker debt recovery compared to a mortgage.
- When exercising the right of subrogation, seizure is not required, making it more advantageous for enforcing security rights compared to a mortgage.
3Advantageous during liquidation.
- The liquidation process is faster compared to court-ordered auctions based on mortgages (in some cases, disposal through private contracts is possible).
- In the event of a loss of due interest by the debtor during the real estate development project, the trust property and loan debt can be transferred to a third party, strengthening business continuity and increasing the likelihood of loan debt recovery.

Public auction by the trust company through collateral trust	Court auction through mortgage※
Public auction by the trust company through collateral trust	Duration: Possible within as short as approximately 30 days. · Receipt of liquidation request from the financial institution: 1 to 2 days · Performance demand: 20 days (can be shortened by priority beneficiary request) · Public auction notice: Public auction can be conducted after 10 days have passed since the auction notice	Duration: Approximately 8 months · Auction Start Decision-Dividend Request Period: 3 months · Sale Decision - Payout: 3 months · Dividend Distribution : 2 months ※ The duration may be subject to change depending on the court or other circumstances.
Court auction through mortgage※	Duration: Approximately 8 months · Auction Start Decision-Dividend Request Period: 3 months · Sale Decision - Payout: 3 months · Dividend Distribution : 2 months ※ The duration may be subject to change depending on the court or other circumstances.

Handling Cases

CASE 01
Debt recovery of a debtor who has applied for court receivership.
Bank A handled a loan for Company A using our collateral trust beneficiary certificate as security. However, due to Company A's bankruptcy and application for court receivership, the loan is at risk of becoming non-performing. In response, Bank A inquired about the debt recovery method, and we informed them that the real estate under collateral trust was not subject to asset preservation disposal. Following the request from the financial institution, we promptly conducted a public auction, preventing the financial institution from incurring non-performing loans.
CASE 02
An example of a case where a complex real estate property is entrusted and then a loan is obtained.
Company E planned to secure a loan from Financial Institution B by providing its company-owned real estate as collateral. However, the collateral properties were scattered across multiple locations, and some of the properties had complex legal relationships in progress, leading to concerns about whether they could be accepted as collateral. Upon hearing about this situation, the loan officer at the financial institution instructed Company E to entrust the collateral to our company. In response, we provided an appropriate solution for the real estate with complex legal relationships, took custody of each property, and quickly issued a beneficiary certificate based on this. As a result, Company E was able to secure the loan easily.
CASE 03
An example of securing a loan on time with minimal cost.
Company C, facing a delay in the expected influx of funds at the end of last year, urgently needed financing. After intense efforts, they were able to secure the desired collateralized loans from three financial institutions. However, for Company C, the costs associated with procedures such as mortgage establishment for each financial institution were significant. More importantly, due to the time constraints, they were at risk of not receiving the funds in a timely manner. In this situation, after being introduced by the financial institutions, Company C entrusted the collateral trust to our company. We quickly completed the registration process and issued beneficiary certificates to the three financial institutions, enabling Company C to secure the loan at the necessary time and with minimal cost.

KB Real Estate Trust