Lotte Shopping to ease financial plight with $378 million property sell-off

Lotte Department Store's main branch in the Jung District, central Seoul [LOTTE SHOPPING]

Lotte Shopping is selling off properties worth some 500 billion won ($378.8 million) amid growing financial and credit risks.

The retail arm of conglomerate Lotte Group is presently engaged in the sale of real estate holdings linked to its department stores and supermarkets, according to sources within the investment banking sector. Lotte Shopping has reportedly appointed property management firm NAI Korea as the lead manager for the sale and has sent a teaser letter to potential investors.

"We are currently reviewing the sale of assets that are non-operational," an official from Lotte Shopping told the Korea JoongAng Daily on Thursday. "It is to enhance the long-term financial stability and robustness of our financial structure."

The assets specifically linked to Lotte Department Store encompass various holdings such as a logistics center, factory and even cinema outlets. The projected sales are estimated to yield around 300 billion won.

Additionally, assets linked to Lotte Mart and Lotte supermarket, comprising stores and outdoor parking areas, are projected to be sold for an anticipated 200 billion won.

The assets on sale are not in operation.

The move is seen as a strategic response to the prevailing economic headwinds facing the conglomerate's primary business segment.

Lotte Shopping saw a 7.2 percent year-on-year dip in revenue, amounting to 3.62 trillion won, during the second quarter. Operating profit also declined by 30.8 percent to reach 51.5 billion won. The company attributed these declines to factors like waning consumer sentiment and escalating operational costs in its main department store division, which has contributed to more than 20 percent of the retail unit's revenue.

The move by Lotte Shopping follows a period of heightened financial commitments since 2021, which includes reduced asset sales and investments like the acquisition of the Korean furniture brand Hanssem, leading to an increase in net debt.

Concurrently, Lotte Group's credit risk has grown, including major affiliates like Lotte Chemical witnessing credit rating downgrades. The conglomerate's financial obligations expanded due to factors such as a liquidity crisis stemming from its construction unit's project financing for the Legoland construction, and substantial capital infusions for M&As.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]