This article was published on Dec. 31, 2024, at 4:35 p.m. on the CHOSUNBIZ Money Move (MM) website.
As Aekyung Group's department store sector leading AK Plaza has decided to repurchase the core property of its Bundang branch, there are analyses suggesting that this decision is a precursor to the future sale of AK Plaza. Aekyung Group has previously attempted to sell AK Plaza, but it is known that the plans were shelved due to unfavorable circumstances.
According to the investment banking (IB) industry on the 31st, AK Plaza has decided to acquire the Bundang branch property from Capstone Asset Management. Specifically, it is acquiring revenue certificates for a real estate fund that holds the Bundang branch as an investment asset. The acquisition of the Bundang branch property comes 10 years after it was liquidated in 2015 through a sale-and-leaseback method for financial restructuring.
It is unusual to repurchase properties in a sale-and-leaseback arrangement. This has led to speculation in the industry that this move is a precursor to the resale of AK Plaza. Aekyung Group is reported to have explored the sale of AK Plaza this year as well, but shifting to a rights offering due to the lack of suitable buyers.
The funding for the acquisition of the Bundang branch property has been sourced from Aekyung Group, which is expected to improve AK Plaza's performance. Last month, Aekyung Industrial lent 50 billion won to AK Plaza in the form of short-term borrowing, and on the 19th of this month, the largest shareholder, AK Holdings, participated in AK Plaza's rights offering with an additional 60.1 billion won.
If the financial structure of AK Plaza improves with the acquisition of the Bundang branch property, it could be able to approach a sale under better conditions. An industry source noted, “AK Plaza attempted to sell through a foreign IB 2 to 3 years ago but ultimately failed,” adding that “recovering the property will reduce rent recognized as sales and management expenses, thus improving the financial structure.”
Founded in 1999, AK Plaza is Aekyung Group's department store and shopping mall operator. It also engages in real estate development and leasing, as well as investment operations. Due to accumulated losses, it is considered the 'sore thumb' of the AK Group. From 2020 to last year, AK Plaza's cumulative operating loss reached 92.7 billion won, with a net loss of 38 billion won recorded just in the third quarter of this year. AK Holdings, the holding company of Aekyung Group, is the largest shareholder, holding a 60% equity stake.
Meanwhile, parent company Aekyung Group is facing a crisis due to the Jeju Air incident at Muan International Airport. As of last year, Jeju Air's operating profit was 169.8 billion won, exceeding that of its other subsidiaries, Aekyung Industrial (61.9 billion won) and Aekyung Chemical (45.1 billion won), but the incident is expected to inevitably deteriorate Jeju Air's profitability. In the past four years, AK Holdings has invested 615 billion won in Jeju Air's rights offerings.
An AK Holdings official said, “We have discussed the sale of AK Plaza with foreign IBs, but we are currently focused on the company's own turnaround,” adding that “the acquisition of the Bundang branch is merely part of AK Plaza's normalization efforts, and there are currently no plans at AK Holdings for the sale of AK Plaza.”