[Q&A] Shinsegae to Invest 1.7 Trillion KRW in Gwangju Complex Shopping Mall and Department Store... "Will Become a Mammoth-Scale Development"

Shinsegae to Invest 800 Billion KRW in Gwangju Complex Shopping Mall and 900 Billion KRW in Department Store, Simultaneous Development
Shinsegae Property Selects Eodeungsan Tourism Complex as Honam Region's First Suitable Site for Starfield
Plan to Develop Authentic Stay-Type Complex Shopping Mall Featuring Shopping, Culture, Leisure, Entertainment, and Recreation
Shinsegae Department Store to Establish Gwangju Shinsegae as a 'Landmark Department Store' with Honam's First 'A.L.U.S.H.A' Entry
"Synergy from Simultaneous Development of Starfield and Department Store... Will Contribute to Job Creation and Regional Economic Revitalization"

(From left) Lim Young-rok, CEO of Shinsegae Property, and Lee Dong-hoon, CEO of Gwangju Shinsegae, are responding to questions at the 'Shinsegae Group Gwangju Development Press Conference' held on the 17th at Ramada Plaza Gwangju Hotel in Seo-gu, Gwangju.

[Asia Economy Reporter Kim Yuri] Shinsegae Group is planning to simultaneously develop a complex shopping mall (Starfield) and a department store in Gwangju Metropolitan City. Shinsegae Property is developing 'Starfield Gwangju (tentative name),' a stay-type authentic complex shopping mall where shopping, culture, leisure, entertainment, and even relaxation can be enjoyed in one place. The Eodeungsan Tourist Complex has been selected as the suitable development site. At the same time, Shinsegae Group plans to significantly expand the existing Gwangju Shinsegae to develop it beyond the region's number one store into the 'best landmark department store in Korea.' It is expected that a total investment of 1.7 trillion KRW will be made, with 800 billion KRW for Starfield Gwangju and 900 billion KRW for the department store.

On the 17th, Shinsegae Group announced this development plan at the 'Shinsegae Group Gwangju Development Press Conference' held at Ramada Plaza Gwangju Hotel in Seo-gu, Gwangju. Below is the Q&A.

▲What is the scale of Starfield? How much funding is planned? Since the Eodeungsan Tourist Complex is currently under litigation, do you have any contingency plans or alternatives regarding related variables?

= The facilities on the site are planned to be at least 99,174㎡ (about 30,000 pyeong) as shown in the bird's-eye view, including suburban and indoor parking lots. Regarding funding, to accommodate a 30,000-pyeong scale shopping mall, a total floor area within 90,000 pyeong and an investment of about 800 billion KRW are expected to be required (including partner company investments). For the Hanam branch, there was a partner investor named Tufman, and for the Goyang branch, the National Pension Service was a partner investor. The overall scale will not be as large as Starfield Hanam, but it is expected to be a mammoth scale covering the Jeolla and Honam regions.

The site was chosen with Eodeungsan in mind. Eodeungsan has clear locational strengths and weaknesses. The Eodeungsan site does not fit the vertical structure that can highlight the characteristics of a department store. Therefore, the department store will prioritize development in the city center, but since Starfield includes extensive leisure and entertainment facilities, a larger site like Eodeungsan was considered. The Eodeungsan site is thought to be the optimal location that can leverage Gwangju's geographical advantage and accessibility to nearby cities such as Muan.

Regarding the legal dispute, we will observe the situation. We consider the Eodeungsan site the best location and will consider other sites depending on the litigation outcome.

▲There was a report about building a Starfield at Yeocheon Station in Yeosu. If development is proceeding in Gwangju, what will happen to the Yeosu development?

= Yeocheon Station is not a Starfield. Starfield is a large-scale investment of about 800 billion to 1 trillion KRW in commercial areas with over 2 million people. For small and medium-sized regional cities, Property is introducing a brand called 'Starfield City.' Recently, a development plan called 'Starfield Village,' where nearby residents can maintain their daily community life, has also been introduced. In the case of Yeocheon, it can be considered a community concept Starfield Village.

▲Since Shinsegae operates Gwangju Shinsegae, there were many talks about utilizing the Yousquare site for development. Yousquare seems to have more synergy potential. Are you not considering the Yousquare site? Is it excluded due to excessive land acquisition costs or for other reasons?

= (The Yousquare site) is good in terms of location, but not ideal from a shopping mall perspective. Shopping malls are structures that provide customers with extraordinary experiences on large sites. It is financially difficult to pay for expensive land and buildings to provide such content to customers. Based on the nature of the business, we proposed the Eodeungsan site.

The Yousquare site is good in terms of location, so I understand that many Gwangju citizens and the city government are very interested in how this site will be developed. I think there needs to be some administrative consensus between Gwangju citizens and the city government before discussing development. When specific ideas about the terminal and convenience facilities emerge from Gwangju citizens and the city government, Property will consider and respond accordingly.

▲There were many demands from Gwangju City regarding the Eodeungsan development, especially continuous requests about hotels. Is a hotel included in the development plan? Also, will other Shinsegae-operated businesses like Traders or outlets be included?

= Regarding hotels, I understand that local governments have high demand. However, I think hotels do not provide practical benefits for customers. For the Eodeungsan Tourist Complex, I understand that a certain scale of tourist accommodation facilities must be built. Hotels come in various forms, such as tourist-type and stay-type, so careful consideration is needed about what kind of hotel will be included.

From Property's perspective, we want to make the Eodeungsan site a space like the lungs for Gwangju and Honam citizens. Therefore, we think long-stay accommodation facilities will be effective. For example, we are considering developing complex accommodation facilities where customers from Naju Innovation City can visit Eodeungsan on weekends and stay for several days to relax.

Traders must definitely be included. Outlets and shopping malls have conflicting business characteristics, so more consideration is needed on this part.

▲What is the target opening date for Starfield Gwangju? Since both the department store and Starfield are being developed, there may be variables. What are the contingency plans?

= Since the Eodeungsan site is not confirmed, if the lawsuit between the city and Seojin Construction is resolved smoothly, the site development plan will need to be changed. If all these are adjusted, construction could start in the second half of 2024, with an opening in 2027. Since we do not own the site, if variables arise, we have second and third contingency plans. However, it is not the stage to disclose them now. Currently, we are at the stage of considering whether we can improve local life and provide enjoyment to local residents.

▲Is Starfield Gwangju being pursued independently of Lotte and Hyundai? Will the development site change depending on Hyundai's development plans?

= Property develops shopping malls from the customer's perspective, not the supplier's. Therefore, we invest in buildings in suburban areas. Jeonnam Textile was also a candidate site under discussion with Property, but suburban locations are prioritized. Shinsegae Property's development plan was decided based on how much it can enrich customers' lives, so Hyundai and Lotte's developments were not considered. Our competitor is ourselves. We considered how good content we can provide to customers, and based on that, we selected Eodeungsan.

▲Which site is the Gwangju Shinsegae development site? Is it the site near the existing department store mentioned before? What is the investment amount?

= The Gwangju Shinsegae development site refers to the 5,000-pyeong E-Mart site and the adjacent parking lot. Both sites are owned by Gwangju Shinsegae, so traffic impact assessment will be a major issue. The site where the department store currently stands is not owned by Gwangju Shinsegae, and Yousquare is included in the city plan, making development difficult. After developing a building on the new site, we will connect the existing and new buildings to improve customer access convenience.

About 900 billion KRW is expected to be invested. This amount excludes land costs and only includes building and expected interior costs. Combined with Property, 1.7 trillion KRW will be invested in this project.

▲Regarding the investment amount for Gwangju Shinsegae, will Gwangju Shinsegae finance it independently or receive city support? Will the three major luxury brands be able to enter?

= Gwangju Shinsegae currently has 250 billion KRW in retained earnings. The rest will require considering capital increases and bond issuance. Funding arrangements need to be discussed first with the major shareholder, Shinsegae. Operating a department store of this scale without 'EruSha (Herm?s, Louis Vuitton, Chanel)' is impossible. We are confident in attracting them.

▲Shinsegae attempted a complex shopping mall in 2016 but it failed. Why pursue it now after six years? Is Hyundai Department Store considered? Has the regional win-win plan been resolved?

= The 2016 development attempt was initiated at Gwangju City's strong request, including hotels and local duty-free shops, but was thwarted by opposition from civic groups and others. Recently, especially through Daejeon Shinsegae, attracting complex shopping malls has become an issue, and there has been positive response from Gwangju citizens. Therefore, we felt now is the best time.

Regarding the delayed announcement, last month we thought the department store might replace the complex shopping mall, but concluded that specialized operators should handle complex shopping malls, leading to today's event. We expect partial difficulties and challenges in proceeding with both projects. Nevertheless, since it is essential for Gwangju citizens, we hope the group’s project will be welcomed.

Additionally, the 2016 project and the current one differ in nature. Property emphasizes that complex shopping malls must coexist with the region. Therefore, Starfield is promoting a local corporation. Complex shopping malls that do not coexist with the region have no reason to exist. From this perspective, the start of coexistence is with a local corporation. We aim to create a sustainable model where even small local businesses can live together. That is why Starfield has become a welcomed model in many regions.

▲It is understood that efforts are being made to secure the site near Gwangcheon Intersection. How far has this progressed? Will a hotel be built at the current E-Mart Gwangju location? How much consensus has been reached with Gwangju City?

= If the new department store proceeds as planned, we expect to show the store in the bird's-eye view by 2026. Recently, department stores require at least 2-3 years to attract EruSha brands. Gwangju Shinsegae's additional leased space is understood to cover operational gaps during this brand attraction period.

Besides the B and C sites owned by Gwangju Shinsegae, Yousquare was initially considered. No additional sites have been secured. Since Yousquare still has potential, more consideration is needed regarding the department store site utilization.

Regarding hotels, given Gwangju's commercial characteristics, multiple luxury hotels are unlikely to thrive. Global hotel chains also consider one luxury hotel in Gwangju appropriate. I understand a luxury hotel is being pursued on the Jeonnam Textile site. Therefore, our current development plan excludes hotels. E-Mart Gwangju is tentatively planned to withdraw. If the building shown in the bird's-eye view is developed, E-Mart will be relocated to the basement.

The department store is being expanded and extended for citizens in a future-oriented way, and Starfield is a facility for young citizens, which is a recent issue. We will discuss the necessity of these facilities with Gwangju City. We hope the development plan will be evaluated based on whether Starfield is truly needed in Gwangju, how sincere the plan is, and how necessary the facility is for citizens.