Hanwha Galleria's recent acquisition of The Peak Dosan site for 236.7 billion won and planned purchase of Sunhwa Building will increase the company's borrowing burden by over 400 billion won, according to NICE Credit Rating's analysis published on the 14th. Despite the significant debt increase, the credit rating agency assessed that the immediate impact on Hanwha Galleria's creditworthiness remains limited due to the asset value of the acquired properties. The company won the bid for the Gangnam-gu Sinsa-dong 633-3 site in the fourth public auction held on the 8th, with the successful bid announced on the 9th.
Hanwha Galleria Acquires The Peak Dosan Site for 236.7 Billion Won
Hanwha Galleria disclosed on the previous day that it participated in the public auction for the site located at 633-3 Sinsa-dong, Gangnam-gu, and was selected as the successful bidder. The company won the fourth public auction for The Peak Dosan site with a bid amount of 236.7 billion won on the 9th. The company plans to develop the site into a high-end residential facility for sale. NICE Credit Rating estimates the project will take approximately 4-5 years from land purchase to completion.
External Borrowing to Fund 90% of Total Acquisition Costs
The company currently paid the 10% bid deposit using its own cash reserves, while the remaining 90% balance is expected to be procured mostly through external borrowing. The purchase funds for Sunhwa Building, an office building worth 213.5 billion won scheduled for acquisition at the end of next month, are also expected to be procured mostly through external borrowing. The total funding requirement disclosed by the company for both real estate acquisitions amounts to 450.2 billion won, which could increase further when ancillary costs are added.
NICE Credit Rating Assesses Limited Immediate Credit Impact
NICE Credit Rating stated that while the borrowing burden will increase in the future, the immediate impact on the company's financial stability is considered limited when taking into account the asset value of the acquired properties. The credit rating agency noted that business risk has expanded as the company proceeds with residential facility development projects different from its existing department store operations, but the impact remains limited until actual construction and sales activities begin in earnest. The possibility of significant decline in asset value following real estate acquisition was also assessed as low. NICE Credit Rating stated that "factors such as total project cost scale, funding structure, and sales rate to be confirmed during the project execution process will affect the company's creditworthiness."
Sunhwa Building Purchase Scheduled for Next Month-End
For Sunhwa Building, an office building, the company plans to use the building as its headquarters and utilize it for affiliate rentals and external leasing. Cash flow is expected to be secured through reduced office lease payment burden currently being paid and rental income from external leasing. NICE Credit Rating added that "investment at an excessive level relative to the company's profit generation capacity is underway," and "we plan to closely monitor the company's profitability and financial stability fluctuation levels along with the luxury goods hall reconstruction process scheduled in the future."
FAQ
What is the total borrowing burden for Hanwha Galleria's recent real estate acquisitions?
The total borrowing burden will exceed 400 billion won, including 236.7 billion won for The Peak Dosan site and 213.5 billion won for Sunhwa Building, with the company's disclosed total funding requirement at 450.2 billion won before ancillary costs.
How will Hanwha Galleria fund these property acquisitions?
The company paid 10% bid deposit using its own cash reserves, while the remaining 90% balance for both The Peak Dosan site and Sunhwa Building will be procured mostly through external borrowing.
What did NICE Credit Rating say about the credit impact of these acquisitions?
NICE Credit Rating assessed that the immediate impact on Hanwha Galleria's creditworthiness remains limited despite the significant debt increase, citing the asset value of the acquired properties and the limited impact until actual construction and sales activities begin.
