Acquisition of Land Following 2015 Purchase of New York Palace Hotel Building
Funding Secured Through Asset Securitization and External Investment
Lotte Hotels & Resorts announced on December 15 that it will acquire the land of the Lotte New York Palace Hotel, owned by the Archdiocese of New York.
Lotte Hotels & Resorts (hereafter Lotte Hotels), which currently operates Lotte New York Palace, has secured a foundation for stable long-term investment and operations by acquiring not only the hotel building but also the land. The acquisition price for the land is 490 million dollars (approximately 700 billion won).
In 2015, Lotte Hotels acquired The New York Palace Hotel, a symbol of Manhattan and the first five-star hotel in New York, and rebranded it as Lotte New York Palace. At that time, only the building was purchased, while the land was leased. However, in consideration of long-term brand value enhancement and future asset appreciation, the company has been pursuing the acquisition of the land. After prolonged negotiations with the Archdiocese of New York, the land transaction has been completed.
The land of the Lotte New York Palace Hotel is owned by the Catholic Archdiocese of New York, with lease payments renewed every 25 years. Due to the rise in land value compared to 25 years ago, a significant increase in lease payments was expected at the time of renewal. However, this acquisition has resolved such uncertainties.
This land acquisition is part of the group’s portfolio strategy, including improving financial soundness. By owning both the building and the land, Lotte Hotels can now operate stably without the risk of external variables such as rising lease payments.
To fund the land acquisition, Lotte Hotels is pursuing asset securitization and attracting external investment.
From a long-term perspective, the acquisition cost is expected to be lower than the accumulated lease payments, which will improve operating cash flow in the future. The reduction of lease liabilities due to the end of the lease will lower the debt ratio, thereby enhancing financial soundness. The prime location in the heart of Midtown Manhattan is also expected to have a positive impact on the future asset value of Lotte New York Palace.
Lotte Hotels plans to focus on enhancing brand value by securing stable operations of Lotte New York Palace. This move will serve as an important foundation for strengthening its presence in the global hotel market and expanding its management contract business in global markets, including North America.
A Lotte representative stated, "The acquisition of the Lotte New York Palace Hotel land will be an important turning point for expanding our global business by enhancing our brand value," adding, "We will strive to establish ourselves as a leading global hotel brand in the future."
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