This article was published on Mar. 19, 2025, at 4:13 p.m. on the ChosunBiz MoneyMove site.
As Homeplus undergoes corporate rehabilitation procedures (court management), there are mentions in the financial investment industry that it is fortunate the Real Estate Investment Trust (REITs) listing, which MBK Partners pushed for in 2018 to relieve borrowing fund burdens, did not materialize.
The Homeplus REIT, which was set to include Homeplus stores, garnered expectations as a ‘big catch’ with plans for a listing, but it failed to attract attention from the targeted overseas institutional investors and ultimately withdrew its listing.
At the time, the Homeplus REIT targeted an annual dividend yield of around 7% based on 51 Homeplus stores as its underlying assets. The total asset size was about 4 trillion won, the largest in history, and many anticipated that the listing would succeed smoothly with government support. MBK planned to raise between 1.5 trillion won and a maximum of 1.7 trillion won based on the hoped public offering price band (4,530 won to 5,000 won).
However, the outcome was failure. The Homeplus Asset Management Company (AMC), Korea Retail Investment Management, conducted roadshow meetings with over 200 overseas institutional investors during a two-week demand forecasting period, but few submitted bids at the hoped price. The number of applications amounted to only about half of the fundraising plan, and the price range suggested was reportedly below the lower end of the hoped public offering price band. Ultimately, in 2019, the Homeplus REIT fully withdrew its listing.
Industry analysts believe that looking back at the recent Homeplus situation, it is fortunate for investors that the REIT listing did not go ahead at that time.
MBK had considered a REIT as a liquidity strategy since acquiring Homeplus. During the acquisition process in 2015, MBK borrowed 4.3 trillion won in acquisition financing, of which about 2 trillion won remained unpaid to cover the balance.
At that time, there were many criticisms about the lack of investment attractiveness of the Homeplus REIT. However, Homeplus emphasized that it was contractually capable of increasing rents by 2.5% annually. Moreover, they pointed out that being the largest among domestic REITs would likely lead to inclusion in global REIT funds or active foreign net buying due to entry into the KOSPI 200.
However, had it listed, it is expected that it would not have managed to withstand the soaring interest rates following the 2022 Legoland incident. In a situation where other retail REITs also faced significant losses, the Homeplus REIT likely would have caused even greater losses for investors. The LOTTE REIT and E KOCREF, which have business structures similar to the Homeplus REIT, were valued at around 6,000 won and 7,000 won in 2019 but are currently sitting at around 3,000 won and 4,000 won.
The lukewarm response from overseas institutional investors at that time was attributed to the industry's shift from offline to online distribution. Many landmark stores were missing from the portfolio, and the inclusion of around ten stores with poor performance led to the negative perception of ‘dumping substandard assets.’
An industry insider noted, “If the Homeplus REIT had succeeded in its listing, the burden of interest costs and other expenses would have significantly decreased for MBK, and the Homeplus (corporate rehabilitation) situation would have occurred later than now.” They added, “Instead, like the issues faced by other large corporate REITs, repeated capital increases and the inclusion of substandard store assets would have led to a drop in stock prices, causing severe losses for REIT investors.”
Returning to 2019, MBK raised about 2 trillion won through refinancing the acquisition financing in the second half of that year. In essence, it extended nearly all the loans it intended to repay through the REIT listing. In this process, MBK provided collateral in the form of 78 large supermarket sites valued at 6 trillion won owned by Homeplus. Subsequently, MBK has been recovering investment funds through methods such as selling Homeplus stores and leasing them back afterward.
Homeplus suffered operating losses of 133.5 billion won in 2021, following a direct hit from the COVID-19 pandemic, then reported losses of 260.2 billion won in 2022 and 199.4 billion won in 2023. The number of Homeplus stores, which was 142 at the time of MBK's acquisition in September 2015, has now decreased to 126, a drop of 16 stores.