[Edaily Marketin KIM SUNG-SOO Reporter] MDM Group, South Korea’s largest real estate developer, is set to begin full-scale development of Homeplus stores. Given Homeplus’s current business environment—as the company undergoes corporate rehabilitation—and the state of the real estate market, the strategy involves directly developing its existing stores to boost asset value.

However, as the burden of construction costs has increased due to rising material prices, and since the project’s viability may vary depending on conditions in the pre-sale market, it is expected to take a considerable amount of time before actual development begins.

MDM,

Owner of 10 Homeplus Stores… Development to Begin with Gaya and Siheung Stores

According to the real estate industry on the 14th, MDM Plus, an affiliate of the MDM Group, is pursuing a plan to prioritize the development of the Gaya and Siheung (Geumcheon) stores among the Homeplus locations held by MDM Asset Management.

MDM Plus is the real estate development subsidiary of the MDM Group. Moon Hyun-jeong, the eldest daughter of MDM Group Chairman Moon Ju-hyun, and Moon Cho-yeon, his second daughter, each hold a 47.62% stake.

MDM Plus aims to submit the relevant development plans to the Seoul Metropolitan Government during the second half of this year. However, the specific timing of the submission has not yet been determined.

MDM’s goal in developing Homeplus stores is to increase the utilization of its assets while enhancing the potential for return on investment.

MDM Asset Management has, to date, held 10 Homeplus stores in major regions across the country through the “Kaim General Private Real Estate Investment Trust No. 21 (Kaim No. 21).” The underlying assets of Kaim No. 21 include Homeplus stores such as the Gayang, Gyesan, Dongchon, Siheung, Ansan, Ulsan, Woncheon, Ilsan, Jangrim, and Cheonan locations.

Originally, MDM Asset Management had devised a strategy to hold and operate these assets over the long term. The fund’s maturity date is December 29, 2030, and the plan had been to hold and operate the assets until 2035.

However, the situation changed when Homeplus filed for corporate rehabilitation proceedings last year. This was due to increased uncertainty surrounding the major tenant, as well as the need to reevaluate future utilization plans for the held assets.

MDM has been reviewing the development potential of Homeplus’s Ansan Gojan, Gayang, and Siheung stores. All three locations have ceased operations and are considered to have locations and scales suitable for mixed-use residential and commercial development compared to other stores.

In particular, the Gaya and Siheung stores are being cited as assets that MDM is prioritizing for development.

Over 500 billion won in emergency funding… Will development accelerate the exit strategy?

From MDM’s perspective, the development of Homeplus stores means more than just business expansion. Having already invested massive amounts of capital, the company now faces a growing need to increase the value of its real estate holdings in order to recoup its investment.

Earlier this past March, the MDM Group injected over 500 billion won in emergency funds to prevent an Event of Default (EOD) on Kaim Fund No. 21.

An EOD refers to a situation where, due to a borrower’s breach of contract or a decline in creditworthiness, the bank demands early repayment of the loan. Since MDM Group injected massive funds to put out the fund’s immediate fire, a strategy to recover its investment by leveraging its held assets has become crucial going forward.

Accordingly, analysts suggest that rather than holding and operating Homeplus stores for the long term as before, a more viable option is to develop the properties to increase their asset value and then sell them to recover funds.

In particular, market attention is focused on the future business direction of the Homeplus Gaya and Siheung stores, which MDM Plus is prioritizing for development. The sites of large-scale retail facilities such as the Gaya store are considered to have high development value, as they are large plots capable of mixed-use development combining residential, office, and commercial facilities, in addition to the operation of existing stores.

However, there are still numerous procedures to navigate—such as obtaining permits and conducting feasibility studies—before actual development can begin. If MDM Plus submits its development plan to the Seoul Metropolitan Government in the second half of this year, the specific business direction and scale of the development are expected to become clearer.

Industry observers note that MDM Group’s current development initiative could serve as a model for new ways to repurpose Homeplus stores.

Recently, the Homeplus Yeongdeungpo store was sold to a KB Securities consortium for the mid-300 billion won range for development purposes. The price per 3.3 square meters (pyeong) was in the mid-17 million won range. The KB Securities consortium plans to develop the site into six buildings ranging from three basement levels to 20 stories above ground, featuring 552 residential units, as well as office space, neighborhood amenities, and retail facilities.

A real estate industry official stated, “There is a growing trend to view Homeplus stores not merely as retail facilities but as real estate assets capable of large-scale development,” adding, “Given that MDM Group has successfully completed numerous large-scale projects based on thorough market analysis and differentiated marketing strategies, it will be interesting to see how they develop the Homeplus Gayang and Siheung branches.”