This article was published on May 14, 2025, at 3:07 p.m. on the ChosunBiz MoneyMove site.
Homeplus, which is undergoing corporate rehabilitation procedures, has notified some store landlords who refused to reduce rents of the termination of lease contracts. Following Homeplus's termination of the lease contracts, unpaid rents are expected to be converted from priority repayment claims into subordinate claims.
On the 14th, according to investment banks (IB) and legal circles, Homeplus notified the termination of lease contracts for 17 leased stores where rent adjustment negotiations had failed. Homeplus submitted an application for approval of the termination of the mutual contract due to non-performance to the Seoul Rehabilitation Court the previous day and received approval from the court. Homeplus noted, "Due to circumstances beyond our control, we were compelled to notify the termination of the contract with court approval."
According to the Debtor Rehabilitation Act, the administrator of a corporation that enters corporate rehabilitation procedures has the option to terminate or perform the lease contract, and the counterpart can request the administrator to answer whether the contract will be performed. If there is a request from the counterpart, the administrator must respond within 30 days regarding the performance of the contract.
About a month after entering corporate rehabilitation procedures in March, Homeplus began negotiations to reduce rents with a total of 61 landlords holding Homeplus stores. A 35% reduction was requested from public real estate funds and public Real Estate Investment Trusts (REITs), while 50% reduction was asked for private real estate funds and private REITs. A real estate industry official said, "Homeplus notified the termination of contracts to stores that refused to reduce rents and intends to handle the owed rent as rehabilitation collateral."
Many landlords who initially received official documents from Homeplus refused rent negotiations. This is because most acquired the stores in the form of 'sale and leaseback' and are using the rent paid by Homeplus to pay the interest on borrowing funds. Typically, funds and REITs cover 60% to 70% of the real estate purchase price through loans, filling the remainder with the investors' investment. In this situation, if rents are halved, challenges may arise in repaying interest.
Ultimately, the rent that was classified as a public interest claim is likely to be converted into a subordinate claim. Since the effects of the termination of the contract do not take immediate effect upon notification, the stores can continue to operate and defer rent payments until the submission of the rehabilitation plan. Claims for damages from landlords due to contract termination will be converted to rehabilitation collateral according to the Debtor Rehabilitation Act. This situation means that investors are bound to incur losses both temporally and financially. Homeplus seems to recognize this situation and has taken concrete actions.
An industry official explained, "Since Homeplus said it plans to continue negotiations until the rehabilitation plan is submitted, it does not appear that they intend to vacate the stores immediately, and since it is only a notification for now, the contract remains valid, they will operate without paying rents." They added, "Landlords will need to resolve interest with their own funds until the repayment period arrives after the rehabilitation plan is approved, and if the repayment rate decreases, it effectively results in a reduction, putting them in a difficult position."
The operators who have accepted the rent reduction are feeling disgruntled. One official from an asset management firm said, "Once the choice to reduce rents has come to the operators, refusing it could lead to responsibility for closing shops," and added, "Given that Homeplus has declared normal operations, we hope they will properly pay future rents that may arise."
Currently, the main landlords with Homeplus stores include MDM Asset Management (10 stores), Hana Alternative Investment Asset Management (8 stores), DL Group (5 stores), IGIS Asset Management (4 stores), Youkyung PSG Asset Management (3 stores), Samsung SRA Asset Management (2 stores), and KB Real Estate Trust (2 stores).