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South Korean companies rush to sell property as market downturn deepens

SEOUL -- The real estate market is not what it was. In its heyday, property was equivalent to astronomical amounts of cash, if located in the right place. And it promised even more cash in the future; the best sort of contingency plan one could have.

But that era seems to be over.

As a testimony, experts point to the recent rush from the corporate sector to rid themselves of their non-liquid property assets, a move feared to further dampen an already sluggish real estate market.

“Companies, especially those with new plans for the future and are sitting on not-so-well utilized real estate, or don't really need that property to generate sales, are increasingly trading in for more liquid assets,” said Kang Min-seok, a senior researcher at Meritz Securities.

Some major conglomerates including Lotte Group, KT and SK Group either already have sold significant amounts of real estate, or are planning to sell — mostly to get their hands on more cash.

The money is likely to be used to finance new projects, or simply be a part of corporate reserves, experts said.

In particular, Lotte, known for its attachment to its land and real estate, has put key lots up for sale.

Lotte Shopping is currently trying to sell some off its assets owned by its Lotte Mart stores in Seoul, and also those located in provincial regions.

That does not mean the company will be losing its branches, only the real estate, meaning more cash.

The company also has no intention of incurring the costs of a move-out, since it plans to stay where it is on long-term leases.

Taxes have gone up, and with the real estate market in the doldrums, the financial benefits of retaining the property have been eroded.

“Lotte Shopping is not a company with too much debt, but we would like to generate more cash to make more inroads abroad,” said one source at the firm.

Jinro, another major firm here, has plans to put its headquarters on the auction block as well, while KT, the nation's top telecommunications firm, sold off some 150-billion-won-worth (US$126-million-worth) of real estate assets between last year and the first half of this year. It plans to dispose of some 300 billion won more by the end of the year.

1 Comment
August 30, 2010    parag.rikhav@
Around the year 2005 to mid 2007, real estate price were soaring as high as one could ever imagine. Most of the Asian markets were on a high. But with recession that hit the US markets led to steep downfall in most of the real estate markets. And right now, although the worst of recession has passed, real estate market still have long way to go in up-scaling their prices.
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