Lotte said on the 15th that it acquired the LOTTE New York Palace hotel land in Manhattan, New York.
Lotte Hotel & Resort (Lotte Hotel), which operates LOTTE New York Palace, secured a stable base for long-term investment and operations by acquiring the land as well as the hotel building. The land acquisition price is $490 million (about 700 billion won).
In 2015, Lotte Hotel acquired "The New York Palace Hotel," a symbol of Manhattan and the first 5-star hotel in New York, and reopened it under the name "LOTTE New York Palace."
At the time, only the building was purchased and the land was leased, but the company pursued a land acquisition in light of long-term brand value growth and future asset value. After lengthy negotiations with the Archdiocese of New York, the land transaction was completed.
The LOTTE New York Palace hotel land was owned by the Catholic Archdiocese of New York, and the lease had to be renewed every 25 years. With the rise in land value, a steep rent increase had been expected at renewal, but the acquisition removed that uncertainty.
The land acquisition was carried out as part of executing the group's portfolio strategy, including improving financial soundness. To acquire the land, Lotte Hotel is pursuing financing through securitization of assets it holds and attracting external investment.
In the long term, the acquisition cost is lower than the cumulative rent, so operating cash flow is expected to improve. Observers say financial soundness will also rise as the debt ratio falls due to a reduction in lease liabilities following the end of the lease.
Lotte Hotel plans to focus on enhancing brand value, using the stabilization of LOTTE New York Palace operations as a springboard. It plans to strengthen its footing in the global hotel market and use this as a key foundation to expand its management-by-commission business in global markets, including North America.
A Lotte official said, "The acquisition of the LOTTE New York Palace hotel land will be a pivotal turning point for global business expansion in terms of boosting brand value," adding, "We will work to establish ourselves as a leading global hotel brand."