Lotte Construction is moving to sell the Toegyewon military base site in Namyangju, Gyeonggi. The Toegyewon military base site is the location the government gave to Lotte Group in place of the Seongju golf course in North Gyeongsang, which was selected in 2017 as the site for the Terminal High Altitude Area Defense (THAAD) deployment. Lotte Construction is said to be comprehensively reviewing options to participate as the builder or invest in the project if the site is developed, while pushing ahead with the sale of the Toegyewon military base site.
According to Lotte Construction and the development industry on the 3rd, Lotte Construction is pursuing the sale of the military base site in Toegyewon-eup, Namyangju. The plan to sell the Toegyewon site was approved by the management committee within the board of directors at the end of September.
A Lotte Construction official said, "It is true that the board passed the agenda to sell the Toegyewon site," but added, "Based on that, the business unit is reviewing it by looking at various conditions such as market conditions and interest rates related to the sale. The sale has not been fully decided. We are keeping all options open."
Lotte Construction purchased the Toegyewon site from Lotte Trading in 2021. After the Seongju golf course of 1.48 million square meters owned by Lotte Group was designated as the THAAD site, the government handed over the Toegyewon site to Lotte Group in place of the golf course. Lotte Construction pushed a development project on the site, including building multifamily housing, but the project has not proceeded even after four years.
The sale price of the site is estimated in the development industry to be around 200 billion won. The current book value of the Toegyewon site is 107.1 billion won. According to the development industry, after purchasing the Toegyewon site, Lotte Construction is also said to be considering options to participate in construction or invest in the development project.
However, Lotte Construction says the direction of the sale and development has not been decided. The specific plan to sell the Toegyewon site and the direction of site development are still being reviewed at the working level, Lotte Construction said. A Lotte Construction official said, "We are actively reviewing it to see if we can create a project," adding, "Nothing has been decided yet."
Lotte Construction's move to sell the Toegyewon military base site is a decision to improve its financial structure. Since last year, as the economic downturn has prolonged, Lotte Construction has been repeatedly dogged by liquidity crisis rumors. When the project financing (PF) crisis flared last year, Lotte Construction escaped a liquidity crunch by creating the Project Charlotte fund worth 2.3 trillion won at the group level. Lotte Construction's PF contingent liabilities fell to 3.2 trillion won as of the end of September.
This year, Lotte Construction has also moved to secure additional liquidity, including receiving consulting on the sale of its headquarters building in Jamwon-dong, Seocho-gu, Seoul, and on plans to securitize idle sites it owns.
It is also aggressive in raising capital. On the 21st of last month, Lotte Construction decided to issue hybrid securities (perpetual bonds) worth 700 billion won. With the issuance of hybrid securities, Lotte Construction's total capital will expand from 2.8445 trillion won as of the third quarter to 3.5445 trillion won, and the liability ratio is expected to improve from 214% to the 170% range.
A NICE Investors Service official said, "With the long-term funds secured through this issuance of hybrid securities, along with the company's cash liquidity on hand, additional financing capability, and the ongoing financial support from affiliates, we judge that control over PF asset-backed securities will be possible."