Homeplus Sale Remains Uncertain... Public Fund Faces Third Disclaimer of Opinion

Public Real Estate Funds Face Billions in Potential Losses
Liquidity Risks Mount as M&A Process Drags On
Kim Byungjoo: "Homeplus Will Pursue Pre-Approval M&A at All Costs"

As Homeplus's corporate rehabilitation process remains shrouded in uncertainty, a series of disclaimers of opinion have been issued regarding public funds backed by Homeplus store properties.

According to the investment banking industry on October 22, YuKyung PSG Asset Management announced that the YuKyung Public Real Estate Investment Trust No. 3 Fund received a disclaimer of opinion from its auditor regarding the 22nd fiscal audit report (May 21 to August 20). This marks the third consecutive disclaimer of opinion since the 20th fiscal audit in April.

In front of a Homeplus store in Seoul on the 31st. Photo by Yonhap News

This fund is backed by three Homeplus stores: Ulsan, Gumi Gwangpyeong, and Siwha. The total acquisition capital for this fund amounted to 300.2 billion won, of which 107.3 billion won was raised through the public fund. The main distributors were DB Financial Investment, SK Securities, and KB Securities. The remaining approximately 200 billion won was financed through secured loans.

The disclaimer of opinion arose after Homeplus applied for corporate rehabilitation in December last year. The auditor was unable to obtain data related to the valuation of real estate and tangible assets, and deemed that verification through other procedures was also impossible. In addition, overdue rent issues have made the future of the lease contracts uncertain, resulting in a suspension of fair value assessments.

YuKyung PSG Asset Management attempted to recover the fund by selling the three Homeplus stores in 2023, but has faced difficulties for two consecutive years. As a result, the fund's maturity was extended by three years to February 2028 earlier this year. Since 2023, the fund has not paid out any dividends. This year, dividend payments could not be made due to a lack of funds resulting from Homeplus’s unpaid rent. The fund's yield has also dropped significantly, recording -0.58% over the most recent six-month period (February 21 to August 20).

The situation is similar for the Aegis Core Retail Real Estate Investment Trust No. 126 managed by Aegis Asset Management. In 2017, Aegis Asset Management acquired the Homeplus Jeonju Hyoja store, raising 66.7 billion won through a public fund and 107.5 billion won through loans. Last month, a fair value assessment showed that the value of the Homeplus Jeonju Hyoja store’s assets had fallen by 10% compared to last year, causing the fund's base price to plummet by 29%.

Amid these circumstances, the prolonged corporate rehabilitation process of Homeplus is heightening concerns about potential losses for public fund investors, whose investments total several hundred billion won. If Homeplus fails to secure a preferred bidder by the deadline for submitting its rehabilitation plan, which is November 10, losses for these funds will be unavoidable.

Currently, Homeplus is seeking a buyer through a public competitive bidding process. At the National Policy Committee audit on October 14, MBK Partners Chairman Kim Byungjoo stated, "We are fully committed to a pre-approval merger and acquisition (M&A). Homeplus must be revived. It is absolutely necessary," emphasizing that Homeplus will be saved through a sale, not liquidation.

This content was produced with the assistance of AI translation services.