Lotte Shopping, a retail affiliate of Lotte Group, initiated preparations to divest its real estate holdings in a bid to enhance its financial structure amid subdued business performance, a company official said on Wednesday.
According to a local investment bank, Lotte Shopping sent a teaser letter for the sale of Lotte Department Store’s properties to potential buyers through its underwriter NAI Korea. The company is also planning to distribute an investment memorandum soon.
The targets are nine assets owned by Lotte Shopping, including its logistics center in Bundang, a production facility in Ansan, both in Gyeonggi Province and a culture center in Gwanak, Seoul, all of which are currently not in use. The desired total sale price of all the properties is 250 billion won ($186.7 million).
The largest asset is the logistics center in Bundang, which measures 57,023 square meters in area valued at 68 billion won as of last year. But Lotte wants to sell it for about 150 billion won.
However, Lotte said it is only in the review stage.
“We are looking into the property value of our non-operating assets. After that, we will decide whether to keep or develop them. Nothing has been decided about their sale,” a Lotte Department Store official said.
Lotte Shopping’s move to sell real estate is seen as an attempt to improve its financial structure. The company’s asset sales have decreased since 2021 and its acquisition of a stake in local furniture giant Hanssem has led net deposits to increase. The amount of adjusted net deposits soared from 11.67 trillion won in 2021 to 12.13 trillion won, last year, according to Korea Investors Service.
Lotte Shopping’s declining business performance also contributed to the prospects of real estate sales.
The retail firm’s consolidated sales and operating profit in the second quarter of this year stood at 3.62 trillion won and 51.5 billion won, respectively, down 7.2 percent and 30.8 percent, year-on-year.
The poor business performance of Hanssem, which Lotte acquired jointly with IMM PE in 2021, is also pressuring the retail giant. Lotte took over Hanssem by paying 220,000 won per share, but the stock price has plunged, which could further increase losses.
source: koreatimes