Shinsegae buys Central City in Gangnam

Shinsegae Group said Tuesday that it will acquire a controlling stake in Central City, the landlord of its department store’s outlet in Gangnam, southern Seoul, in a bid to fend off competition from rival retailers.

Shinsegae, which recently sold off its Incheon outlet to Lotte Department Store, said it will buy a 60-percent stake worth over 1 trillion won ($903 billion) in Central City from four Malaysia-based investment companies owned by a foundation of the Unification Church.

Spanning over 59,000 square meters in Banpo, Seocho-gu, the Central City site houses the Shinsegae department store, a Marriott Hotel, an express bus terminal and a movie theater.

Shinsegae has leased the department store building since 2000 under a 20-year contract.

Shinsegae’s Gangnam store posted some 1.2 trillion won in sales last year, the second highest among all department stores nationwide after Lotte Department Store’s main outlet in downtown Seoul.

Lotte Group recently acquired the site and building of Incheon’s Nam-gu bus terminal where a Shinsegae department store is located. Rumors have spread that Lotte’s next target is a bigger presence in the Gangnam area where Lotte’s department store business has been relatively weak behind rivals Hyundai and Shinsegae.

Shinsegae has earlier been at odds over the lease as the Unification Church’s foundation became the new owner of Central City.

The acquisition, therefore, is believed to be an inevitable step aimed at preventing further conflicts with the landlord and helping to stabilize store operations.

“We decided to make the acquisition to stabilize business at our Gangnam store, and also because the terminal site holds great potential for development in the future,” a Shinsegae official said.

The daily floating population around the Gangnam express bus terminal, which is surrounded by expensive apartment complexes, amounts to 700,000.

In Gwangju, Shinsegae is using the building of the city’s bus terminal, of which Kumho Industrial is the major shareholder, under a 20-year lease through 2015.

Some observers note that Shinsegae is likely to purchase the Gwangju Shinsegae site as well.

By Kim So-hyun (sophie@heraldcorp.com)