Lotte Mall Suji Branch 380 Billion Refinancing... Sale Timing 'Under Consideration'

Korea Investment & Securities Leads Syndicate Recruitment
Lotte Shopping and Lotte Asset Development Sign 20-Year Long-Term Lease Contract
Increasing Nearby Apartments Enhance Role as Central Commercial Area
Stable Cash Flow... Expected to Increase Value for Sale

JL United, a major real estate development company, refinanced a loan of 380 billion KRW secured by Lotte Mall Yongin Suji branch. Although Lotte Group had planned to sell the Lotte Mall building, which it agreed to lease for 20 years, five years ago, it has continued to operate it for five years and is now weighing the timing of the sale.

Exterior of Lotte Mall Yongin Suji Branch

According to the investment banking (IB) industry on the 24th, JL United raised 380 billion KRW through the "Korea Real Asset Yongin Commercial Facility Private Real Estate Trust." The building and land of the newly constructed mixed-use commercial facility "Lotte Mall Suji branch," located in Seongbok-dong, Suji-gu, Yongin-si, Gyeonggi-do, were provided as collateral. Investors were recruited by dividing the funds into 280 billion KRW in secured loans and 100 billion KRW in trust beneficiary certificates.

The raised funds will be used to repay existing borrowings and to re-attract investors. JL United received project approval in 2005 for the development of a mixed complex in the Yongin Seongbok District Special Planning Zone and proceeded with the construction and sale of residential and commercial facilities. Lotte Construction was selected as the contractor to build 2,356 apartment units, 375 officetel units, and commercial facilities.

JL United initially planned to sell the commercial facility as a whole after its completion in 2019. However, since Lotte Group decided to use it under a long-term master lease, the direction shifted to operating it for a certain period before selling. This was based on the judgment that stable cash flow would be generated over the long term, and as the local residential facilities expand and the commercial district grows, the sale price could be increased.

Accordingly, 380 billion KRW was raised secured by the commercial facility to repay the project financing (PF) borrowed for the development project. At that time, private investment trusts set up by Korea Investment & Securities and Koramco Asset Management participated as major investors. This recent fund raising is a refinancing of the funds raised at that time.

Lotte Shopping and Lotte Asset Development have entered into a 20-year master lease contract and are tenants of the Lotte Mall commercial facility. Lotte Mart, Lotte Mall, and Lotte Cinema pay annual rents of 3.7 billion KRW, 14.5 billion KRW, and 1.5 billion KRW respectively. The rent is used to repay various costs such as loan interest, and the remaining money is distributed as dividends to the trust beneficiary certificate investors.

The IB industry expects JL United to soon begin the sale process for the Lotte Mall Suji branch. The master lease contract with Lotte Group has passed five years, and with many apartments built around, the expected sale price is also believed to have increased.

An industry insider said, "Major apartment complexes such as Lotte Castle, I-Park, Taeyoung Decian Phase 1, e-Pyeonhansesang Suji, and Seongdong Village LG Village are located nearby, making Lotte Mall Suji branch a key commercial facility in the area," adding, "With more than 10 years remaining on the master lease contract with Lotte Group, the value has likely steadily increased over the past five years."