KOREIT's old Lotte Mart Dongdaejeon store, operated through a real estate investment trust (REIT), is going to auction. Some financial institutions among the main creditors applied for an auction to the court regarding the buildings and land captured as collateral after the REIT failed to pay interest on its secured loans. This REIT, which has faced a liquidity issue following the closure of the Lotte Mart seven years ago, has ultimately fallen into a state of delinquency.
According to the Ministry of Land, Infrastructure and Transport and Hantoshin on the 2nd, Hantoshin's K1 No. 3 corporate restructuring real estate investment company (CR REIT) has had real estate provided as collateral put up for auction after failing to repay its loan interest. Nam Daejeon Agricultural Cooperative, among the main creditors, informed the K1 No. 3 CR REIT of the loss of benefits on February 5 after the REIT fell into arrears with its loan interest, and subsequently applied for auction to the district court on the 19th of last month.
The size of the loan received by the K1 No. 3 CR REIT from the main creditors, including Nam Daejeon and Gumi Agricultural Cooperatives, is 15 billion won. The scale of non-performing loans amounts to 264.23 million won. The estimated value of the land and buildings owned by this REIT stands at approximately 38.5 billion won.
Hantoshin is expected to address this issue by securing funding from shareholders, but it has been reported that no definite plan has been established so far. A representative from Hantoshin noted, "The auction application has been submitted at the request of the creditors, and there are currently no plans set in place for the future."
Hantoshin acquired the old Lotte Mart Dongdaejeon store located in the Dong-gu district of Daejeon through the K1 No. 3 CR REIT in 2013. However, after just five years post-acquisition, Lotte Mart closed, leading this CR REIT to struggle for years without finding tenants, resulting in difficulties securing rental income.
The K1 No. 3 CR REIT recorded cumulative losses amounting to several billion won before finally attracting tenants in 2021. However, it was reported that as of recently, only about 60% of the total area was leased, failing to secure sufficient rental income necessary for the REIT's operation.
Consequently, the K1 No. 3 CR REIT's net loss for the previous year reached 1.5 billion won. The rental and management income generated by this REIT last year was 580.58 million won, which significantly fell short of the operating expenses of 1.07485 billion won.
The sustainability of the REIT is also in decline. The accounting firm responsible for the external audit of the K1 No. 3 CR REIT stated, "Currently, current liabilities exceed current assets by 18.274 billion won," and added, "Whether the company can continue as a going concern is surrounded by significant uncertainty dependent on the success of its future asset disposal plans and financial improvement strategies."
The largest shareholder of the K1 No. 3 CR REIT is Starconet, holding a 39.24% equity stake. Following that are K-Klavis Asset Management (16.25%), Dongsan Logistics (11.54%), JND Partners (9.23%), and KOREIT (8.31%), which are also listed among the shareholders.