Homeplus Mart's site, which is secured as an asset in a real estate fund and REITs, is struggling with sales. Extensions on maturities and refinancing are being repeated. This reflects the fact that investor responses to local real estate assets are not what they used to be. There are assessments that the real estate funds have undervalued the risks associated with local extinction.
According to the retail industry on the 5th, IGIS Asset Management recently signed a contract to extend the loan maturity of the 'IGIS Retail Real Estate Investment Trust No. 126' by six months after consultations with the main creditors. The original loan maturity was on the 28th of last month. However, the extension was due to difficulties in asset sales amid a downturn in the real estate market. During the loan extension period, dividends will not be paid.
IGIS Asset Management incorporated the Homeplus Jeonju Hyoja store site as a fund asset by investing 187.7 billion won in 2017. The Homeplus Jeonju Hyoja store is the largest hypermarket in the Jeonju area. The rental deposit was 13.5 billion won, and the remaining 107.5 billion won was composed of collateral loans through a private equity fund. The public offering amount was 66.7 billion won. Investors participating in this have not received any dividends since 2023.
The sale has been prepared since August last year. The commercial real estate specialist proptech company Real Estate Planet was selected as the sales agent. However, finding potential buyers has been difficult. Although it was promoted that there is stable back-end demand due to a large residential complex nearby, they have not been able to capture the interest of potential buyers.
As of 2023, the population of Jeonju in North Jeolla Province has dropped below 650,000. According to the 'Population Policy Direction and Tasks for Responding to the Era of Population Decline' published by the Jeonju City Research Institute, the total fertility rate in Jeonju is 0.69. This is lower than the national average of 0.72. This indicates a situation of local extinction where the city cannot expand and is shrinking.
KB Real Estate Trust, which has the Homeplus Pyeongchon store, is also facing difficulties in asset sales. This REIT was established on Jan. 17, 2020. Originally, the plan was to sell real estate and liquidate it within five years. It has been moving toward a sale within the year since 2022, but ultimately decided to extend the maturity.
The Homeplus Pyeongchon store is located on Dong-an Road in the Dongan District of Anyang, Gyeonggi Province. The 4th Line Beomgye Station is in the city center, and the land is classified as a residential area, making it possible for residential development. However, it is difficult to find buyers because even as a residential facility, it is hard to escape the 'unsold trap.' The Pyeongchon 'Acro Bestinew,' which was publicly sold last November, is a representative example. Out of 1,011 units, 391 were sold, but the binding contract rate was only 42%, resulting in unsold units.
This is because the sales prices in regions not subject to the price ceiling system, such as the three districts of Gangnam (Gangnam, Seocho, and Songpa), have recently been set high, reflecting the rapidly rising construction costs. A representative from a real estate development company noted, "Residential facilities are classified as products with the least difficulty in implementation, but it is difficult to boldly proceed with development due to market conditions."
Yukyung PSG Asset Management also extended the maturity of the funds that invested in Homeplus Ulsan, Gumi, and Siheung stores. Similarly, the sales have not gone as planned. The existing maturity of the fund, which holds three stores, was February of this year, but it has been postponed to February 2028 after a three-year extension. This fund invested 300.3 billion won in purchasing the buildings and land of the three Homeplus stores. Among this, the senior loan is 165 billion won, and the junior loan is 36.4 billion won. The rental deposit is 21.7 billion won, and 107.3 billion won was raised through public offering.
Real estate industry insiders predict that the difficulty of sales may increase further due to Homeplus's application for corporate rehabilitation procedures. Up until now, funds have emphasized the stability of sales by stating that Homeplus has entered into a responsible lease agreement, but have met uncertainty with the corporate rehabilitation.
Once the corporate rehabilitation procedures begin, store rental debt obligations, excluding public bonds and commercial claims, may be frozen for the time being. In this case, there is a possibility that rent cannot be paid. Additionally, in the worst case, funds might not be able to pay interest to the creditors, which could result in the expiration of benefits of deadlines (EOD).
The real estate industry views the difficulties faced by funds holding Homeplus stores and land as a case of investing while underestimating the risks of local extinction. Furthermore, it is expected to have a negative impact on the sale of local stores by companies like Lotte Shopping.
A real estate industry representative stated, "The saying that one strong unit is the trend, advising to reside in the provinces but invest in Seoul, is prevailing," and added, "The local population continues to decline, and further demand for commercial and office facilities has disappeared, indicating that liquidation of local funds will become more challenging in the future."
Some analyses suggest that this could also affect Homeplus's intention for normal operations. Homeplus has been selling stores to secure liquidity as the retail market has shifted toward e-commerce. However, even after selling stores, they have continued operations under a sale-and-leaseback structure. This means that rather than holding onto the stores and benefiting from asset appreciation, they have focused on securing liquidity, even if it means incurring fixed costs (rent).
A representative from the investment sector noted, "While Homeplus has stated that it can operate normally, if the fund desires the land for development, it could terminate its leasing relationship with Homeplus," indicating that even if Homeplus wishes to continue operations in certain stores, there is a possibility of eviction. The loan agreements typically contain clauses stating that if it enters into legal management, the fund can take the approval of the creditors to revoke the tenant's status.