Lotte puts department store in Centum City, Busan on market

Lotte Shopping Co. has put one of its core department stores, Lotte Department Store Centum City in Busan, on the market in line with its parent group's restructuring efforts to improve its financial health, according to people with knowledge of the matter on Friday.

The department store is located in Centum City, an affluent commercial and residential neighborhood in Busan, South Korea’s second-largest city. The property, with 10 above-ground floors and seven below ground, is expected to fetch between 200 billion and 300 billion won ($142 million-$213 million).

Cushman & Wakefield, a US real estate services firm, was picked as its sale manager.

“It is in the very early stage of selling the Centum City store and selectively reaching out to potential buyers,” an official with a real estate financing service company told Market Insight, The Korea Economic Daily's capital market news outlet.

A Lotte Shopping official confirmed it is considering selling the property among several options, but nothing has been determined.

The property is expected to be redeveloped into a new commercial or multicomplex building, said the sources.

Lotte Department Store Centum City opened in 2007 near Haeundae Beach, Busan's iconic beach. It is the department store operator's newest branch in the city.

Lotte's archrival Shinsegae Inc.'s arrival in the neighborhood in 2009, however, dealt it a heavy blow. Shinsegae Centum City, next door to the Lotte outlet, is reputed to be the world’s largest shopping complex.

Sales at Lotte Department Store Centum City nosedived to 133.4 billion won in 2023 from 300 billion won annually in its peak years. Today it ranks 29th out of Lotte's 32 department stores in terms of sales.

In the nine months ended in September, the branch posted 63.5 billion won in sales.

Despite its sagging revenue, Lotte had hesitated to dispose of the Centum City branch, its fourth department store in Busan. The port city has symbolic meaning for the retail giant: Its late founder and Chairman Shin Kyuk-ho started business as a chewing gum maker in the city in his 20s.

Relative to its sister companies, Lotte Department Store has been slow to unload non-performing assets. Last year, it offered to sell some stores and properties, but none have yet to find a buyer.

In 2014, Lotte sold four department store branches, including one in Ilsan, Gyeonggi Province, and another in Busan's Dongnae district, to Korean asset managers such as KB Asset Management, Capstone Asset Management and Lotte REIT Co.

The investment firms are now seeking to sell the properties.

On Thursday, Lotte Group denied liquidity crisis rumors sparked by Lotte Chemical Corp.'s struggle to meet bond redemptions.

Write to Byung-Hwa Ryu at hwahwa@hankyung.com
 

Yeonhee Kim edited this article.