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Lotte E&C Sells Toegyewon Military Site for 180 Billion Won to 'Improve Liquidity'

[비즈한국] It has been confirmed that Lotte E&C recently sold the former military site in Toegyewon, Namyangju, Gyeonggi-do, for 180 billion won. This land was originally acquired by Lotte Corporation in 2017 through an exchange for a golf course in Seongju, Gyeongbuk, which was designated as a site for the Terminal High Altitude Area Defense (THAAD) system. Lotte E&C purchased the site four years ago with the intent of developing it. Through this sale, Lotte E&C aims to secure liquidity while also retaining the construction rights for future development projects on the site.

According to industry sources, Lotte E&C sold the Toegyewon military site for 180 billion won on December 23. The site, spanning a total of 67,367 square meters, was bought by Lotte E&C from Lotte Corporation for 101.6 billion won in May 2021. In February 2017, Lotte Corporation acquired the land—formerly held by the Ministry of National Defense—in exchange for the Lotte Skyhill Golf Course in Seongju, Gyeongbuk, which had been designated as a THAAD base. The buyer is a real estate development firm established for the purpose of carrying out residential housing projects in the area.

The Toegyewon military site has garnered attention as a prime location surrounded by new towns: Dasan New Town to the south, Wangsuk New Town to the north, and Byeollae New Town to the west. It is highly regarded for its accessibility, being near Seoul and close to Toegyewon Station on the Gyeongchun Line and the Toegyewon Interchange of the Capital Region First Ring Expressway. Expectations for local development rose when Lotte E&C acquired the land, which had previously been considered an obstacle to development.

However, the Toegyewon military site remained largely vacant after its ownership was transferred to the Lotte Group. During Lotte Corporation’s tenure, fencing was installed and groundwork was initiated, but actual development did not proceed for about three years. Lotte E&C, which acquired the site for development purposes, also classified the area as a residential development project, but failed to break ground before this sale.

Lotte E&C plans to hand over ownership of the site while participating as the construction contractor for the development project. It is reported that Lotte E&C had been pushing for the sale on the condition that it would be the contractor for the site's development. The initial asking price was reportedly near 200 billion won. The future development of the Toegyewon site is expected to feature eight residential apartment buildings ranging from two basement levels to 25 floors above ground. At the time of this sale, Lotte E&C also provided credit enhancement for the project's PF (Project Financing) loan as the contractor.

The sale of the Toegyewon military site is interpreted as a move to improve financial soundness. Since the credit market crisis triggered by the Legoland incident in 2022, Lotte E&C has been attracting external liquidity to respond to PF contingent liability risks. In March 2024, to alleviate the burden of liquidity management, the company established a 2.3 trillion won PF asset-backed securities purchase fund in collaboration with financial firms and affiliates. As a result, PF contingent liabilities decreased from 6.8 trillion won at the end of 2022 to 3.2 trillion won by the end of September 2025, although net borrowings increased from 600 billion won to 2.4 trillion won.

Lotte E&C's financial health is expected to further improve through capital expansion. On November 27, Lotte E&C announced that it would issue hybrid securities totaling 700 billion won through capital replenishment from Hotel Lotte and Lotte Mulsan. The issuance will take place in two tranches of 350 billion won each, on December 29 and January 29. With this issuance, Lotte E&C's total equity is expected to expand from 2.8 trillion won to approximately 3.5 trillion won, and the debt-to-equity ratio on a consolidated basis is projected to improve from 214% in the third quarter of this year to the 170% range.

Korea Ratings commented, "While financial indicators will improve in the short term due to the issuance of hybrid securities, financial pressure could increase again if cash generation capabilities are not improved through working capital recovery. Therefore, after the issuance, the completion of large-scale projects, improvements in presale performance, and the sustainability of financial stability will be crucial factors to watch."