Shinsegae Group is understood to have considered developing a liquidity product utilizing the lease deposit of Starbucks Coffee Korea as part of actively preparing a business efficiency plan. Starbucks Coffee Korea is a representative profitable affiliate among Emart’s affiliates under Shinsegae Group.
According to multiple sources familiar with the situation of Shinsegae Group and Starbucks Coffee Korea on the 2nd, Starbucks Coffee Korea is reportedly reviewing the development of a financial product utilizing lease deposits amounting to around 500 billion won. This is a liquidity product based on lease deposits entrusted to landlords, similar in concept to Jeonse deposit-backed loans. The lease deposit of Starbucks Coffee Korea was around 196.1 billion won in 2015, ten years ago, but rapidly increased to nearly 500 billion won as new store openings surged last year.
This review proposal emerged during the process of Shinsegae Group selling non-core assets and preparing for asset liquefaction since last year. Shinsegae Group has been continuing efficiency measures by selling key stores including Emart's Gayang and Seongsu stores, and merging Emart, Emart Everyday, and Emart 24. Shinsegae Property, a real estate-related affiliate, is pushing to liquefy Starfield Hanam.
A representative from Shinsegae (Emart) Group noted, "While each affiliate was contemplating business efficiency and asset liquefaction measures, Starbucks Korea, which lacks real estate assets, proposed a plan based on its lease deposits, which I understand has been reviewed at the group level." A representative from the real estate development branch of Shinsegae also stated, "We have been researching financial products based on the securely established deposits."
However, there are practical issues with the liquidity plan based on lease deposits, such as the necessity for cooperation from landlords and the slowing increase in lease deposits as the pace of Starbucks openings has decelerated. The domestic store growth rate of Starbucks Coffee Korea has maintained a double-digit growth rate since recording 30% in its early days. The trend of slowing growth began in 2019 (around 9%). Last year, the store growth rate of Starbucks Coffee Korea was only 6.1% compared to the previous year.
The proactive corporate rehabilitation application by the private equity fund MBK regarding Homeplus also had an impact. A representative from a securities firm stated, "Homeplus encountered issues even after liquefying lease deposits received from landlords. Liquefaction based on the refundable deposits is not easy." The representative continued, "Considering similar financial products, such as Jeonse deposit-backed loans, there likely aren't many landlords willing to agree, which is in the same context."
However, people in the real estate industry believe that one background for this review proposal is that Starbucks Coffee Korea has been considered a desirable tenant that "everyone wanted to have." Competition to attract Starbucks as a tenant intensified to increase building values, leading to a trend of constructing buildings to meet Starbucks’ requirements for leasing.
A representative from the real estate development industry remarked, "Since Starbucks is a desirable tenant, if they had requested liquidity measures beforehand, there would have likely been several landlords willing to agree." They added, "While it would have been difficult with other tenants, the brand power of Starbucks may have made such measures possible."
In response, a representative from Starbucks Coffee Korea stated, "It has been understood that it is not true that we have reviewed liquidity products centered around lease deposits."