This article was published on April 8, 2025, at 4:25 p.m. on the ChosunBiz MoneyMove site.
IGIS Asset Management, the largest alternative investment asset management firm in South Korea, is pushing forward with the sale of the multi-complex shopping mall "Mall of K" near Konkuk University Station in Seoul. Since this property was declared to have lost the benefit of a deadline by the creditor group in February, failure in this sale is expected to lead to public auction procedures. In the public auction stage, the minimum bid price decreases gradually with each failure, which is likely to increase losses for investors in the public offering fund.
According to the investment banking (IB) industry on the 8th, IGIS Asset Management plans to conduct a competitive bidding process for Mall of K, which it holds through IGIS Retail Real Estate Investment Trust No. 194. They plan to receive bidding participant documents by the 17th and select a preferred negotiation target after interviews with prospective buyers.
Mall of K is a multi-complex shopping mall with a total floor area of 13,068 square meters (3,593 pyeong), located in Gwangjin-gu, Seoul, with three basement levels and four above-ground levels. IGIS Asset Management acquired Mall of K for 59.6 billion won in 2018. The acquisition funds were supplemented with approximately 20.8 billion won through a retail fund sold by KB Kookmin Bank, 36.1 billion won in senior and subordinated collateral loans, and 2.6 billion won in rental deposits.
At that time, the building was filled with tenants, including a CGV cinema that leased the entire 3rd and 4th floors, ABC Mart, restaurants, and convenience facilities. However, after the COVID-19 pandemic, the asset value began to decline due to the recession in the Konkuk business district. Currently, most of the space is vacant except for CGV. Ultimately, as rental income decreased, the entity fell into debt default due to unpaid loan interest.
IGIS Asset Management held discussions with the creditor group regarding extending the loan maturity and refinancing. However, an agreement ultimately failed, and in February, the creditor group declared a loss of the benefit of the debt deadline. Since the fund's inception date (June 29, 2018), the current yield is at 48.54%.
As a result of an asset revaluation conducted by IGIS Asset Management last April, the asset value of Mall of K was estimated at 54 billion won. This is about a 10% decrease from 60.2 billion won a year prior in 2023. However, the industry expects that it will trade at approximately half of the purchase price. Given that the nearby business district of Mall of K has stagnated, it is challenging to find new tenants, and it is also difficult to develop assets aiming for sales profits.
The industry analysis indicates that, considering the location of Mall of K, developers need to enhance the asset value through development, but the recent initiative by the Ministry of Land, Infrastructure and Transport to improve project financing (PF) systems may pose significant obstacles. The PF improvement plan announced by the ministry in November last year aims to raise the self-capital ratio of construction companies to over 20%. Developers are required to bear 20-30% of the total equity, making it difficult to find developers with sufficient financial strength.
If IGIS Asset Management fails in this sale, the possibility of the grain group leading the public auction procedures cannot be ruled out. This is due to the creditor group's declaration that allows for the exercise of collateral rights. Typically, the creditor group puts distressed assets up for auction through a trust company, and in a public auction, prices decrease step by step with each failure. In this case, the creditor group may lower the price to a level that can recover the amount of the collateral loan.
IGIS noted, "We received a notice that the creditor group plans to transfer the loan debt to a specialized liquidity company," adding that "we will explore various options to minimize investment losses through a normal sale of Mall of K and will work closely with the debt buyer."