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E-Land sells Shanghai warehouse for $2.2 bn to lower debt ratio

The retail giant sold an old logistics center to a Chinese insurer and real estate developer for the better financial structure

By Jan 12, 2022 (Gmt+09:00)

Headquarters of E-Land World, E-Land Group's holding company
Headquarters of E-Land World, E-Land Group's holding company

Retail conglomerate E-Land Group completed selling its first overseas logistics center in Shanghai for about 1.4 billion Chinese yuan ($2.2 billion) to a Chinese insurance group and real estate developer on Dec. 31, 2021. The insurance group, as the financial investor, and real estate developer, the strategic investor, respectively took 90% and 10% stakes in the logistics center.

The first overseas logistics center, comprising three warehouses and an administration building, has a 220,000-square-meter land area and 430,000-square-meter total floor area. The center was constructed in 2011. 

The South Korean conglomerate has decided to focus on its second Shanghai-based logistics center with a 440,000-square-meter total floor area. The second one, which will start commercial operation in October of this year, is equipped with logistics automation systems. The new center's garment transport volume will be quadruple the first center's.

The property sale is part of E-Land’s efforts to secure cash and lower its debt ratio. The Korean conglomerate’s debt ratio as of end-2016, when the Korean conglomerate started improving its financial structure, was 315%. The ratio as of end-2021 was estimated as around 180% and the retail giant aims to lower it to 170% this year. 

This aligns with the group’s sale of its distribution center in Cheonan city, 84 kilometers south of Seoul, to Korean real estate asset manager Neo Value Partners Co. for 160 billion won ($134.3 million) last May. Through selling the property, the conglomerate saved 80 billion won in debts and earned 60 billion in cash. 

Reducing the number of its physical stores, the Korean conglomerate focuses on online businesses in China through mobile platforms TikTok, WeChat and WeChat’s e-commerce service Xiao Cheng Xu. The Korean group’s fashion brands on Xiao Cheng Xu, including kids' brand Paw In Paw and women's brand E-Land, posted 104.2 billion won ($87.5 million) in sales on Nov. 11 alone, China’s shopping day Singles’ Day. Currently, E-Land has more than 5 million Xiao Cheng Xu users.

Industry watchers said E-Land will continue selling properties to list its retail affiliate E-Land Retail Co. and raise the group’s credit rating. E-Land Retail sold 400 billion won worth of its shares to its Korean financial investors in 2017 through pre-IPO funding, but it withdrew its IPO plans as its resort affiliate E-Land Park Co. became embroiled in unpaid wage issues. With around 1.5 trillion corporate value, it again aimed for an IPO in 2019 but delayed the plan due to the volatility of the Korean stock market. Instead, the group went for buybacks of the 400 billion won in shares as it had to do so by mid-June of 2019 if it failed to go public. 

E-Land Group’s holding company E-Land World Co. and E-Land Retail received credit ratings of BBB and BBB+, respectively, last year from Korean credit information companies NICE Information Service Co. and Korea Ratings Corp. NICE lowered the credit outlooks of both companies from “positive” to “negative” due to the ongoing pandemic, while Korea Ratings maintained its positive outlooks.

Write to Ji-hye Min at spop@hankyung.com

Jihyun Kim edited this article.
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