[Exclusive] MDM Group Acquires 'Homeplus Busan Gaya Branch' for 350 Billion KRW

Stores MBK Partners Decided to Close or Sell
Mixed-Use Residential and Commercial Development Planned... Sales Revenue Expected to Reach 1 Trillion Won
Homeplus Store Development Project Kicks Off

[Asia Economy Reporter Lim Jeong-su] MDM Group, the largest real estate development company in Korea, is acquiring the Homeplus Busan Gaya branch owned by private equity (PE) firm MBK Partners. Following the acquisition of Homeplus stores held by Koramco Asset Trust earlier this year, MBK is making additional sales of stores it has decided to close. MDM Group plans to demolish the large retail building and construct a residential-commercial complex apartment with sales approaching 1 trillion KRW.

According to the investment banking (IB) industry on the 26th, MDM Group has agreed to acquire Homeplus Busan Gaya branch for approximately 350 billion KRW. They have currently selected a securities firm as the lead manager and are in the process of raising funds to pay the acquisition price. Acquisition financing is divided into senior, mezzanine, and junior loans according to loan repayment and collateral priority, and institutional investors are being recruited.

MDM Group has provided investors lending acquisition funds with collateral consisting of the land of Homeplus Busan Gaya branch as well as the development profits of The Sharp Banpo River Park. This is done by establishing a pledge with the lending group as collateral holders on each business site and development profits. The Sharp Banpo River Park is a small apartment complex targeted at single or two-person households, developed by MDM Group in partnership with POSCO Construction in Banpo-dong, Seocho-gu, Seoul.

According to the development plan, MDM Group will demolish the large retail building after acquisition and build a residential-commercial complex apartment on the site for sale. After obtaining business permits, construction is scheduled to begin in 2023 and be completed in 2026. If the project to redevelop the low-rise retail building into a high-rise residential-commercial complex apartment is successful, sales revenue is expected to approach 1 trillion KRW.

Homeplus workers held a collective head-shaving protest on the 13th in front of D-Tower in Gwanghwamun, Seoul, condemning MBK Partners' closure and sale of major stores.

Attention is also focused on whether MDM Group will pursue additional acquisitions of Homeplus stores owned by MBK for development projects. MBK, which owns about 140 Homeplus stores, recently decided to close stores including Busan Gaya branch, Daegu Stadium branch, Daejeon Dunsan branch, Tanbang branch, and Ansan branch, and has either completed or is pursuing some sales.

Last month, MDM Group acquired 10 Homeplus stores held by Koramco Asset Trust through a REIT (Real Estate Investment Trust). These include Seoul Gayang branch, Siheung branch, Goyang Ilsan branch, Incheon Gyesan branch, Suwon Woncheon branch, Ansan branch, Cheonan branch, Busan Jangnim branch, Daegu Dongchon branch, and Ulsan branch, totaling 475,228 square meters. The REIT includes major investors such as the National Pension Service and Woori Bank.

These stores have long-term master lease agreements with Homeplus, so the likelihood of immediate redevelopment for other purposes is low until the contract period ends. However, with MDM Group planning to develop Homeplus Busan Gaya branch into a residential-commercial complex, there is analysis that other stores may also have higher redevelopment potential in the future.

An IB industry official said, "Since MDM Group is a real estate development company, it is expected to sequentially promote development projects as the contracts with Homeplus expire," adding, "Most large retail stores are located in major cities or new towns, so significant profits can be made through development projects."

However, whether the development projects will proceed smoothly is uncertain. Friction with Homeplus workers facing employment insecurity is expected to continue, and permission must be obtained from local governments to change the use of retail buildings to residential or other purposes. There is also a possibility of controversy over preferential treatment during this process.