Lotte signs contract for Incheon terminal

By Lee Hyo-sik

Lotte Department Store, the country’s largest department store chain, has signed a contract with Incheon City Government (ICG) to acquire the latter’s bus terminal complex where its rival Shinsegae runs a store. The agreement has dealt a severe blow to Korea’s second largest chain, which has to hand over the shop to its larger competitor in 2017.

Shinsegae claims the agreement between Lotte and Incheon is illegal, vowing to take all possible legal measures to block the deal and secure rights to operate the shop at the port city’s biggest shopping center beyond 2017.

Lotte said Wednesday that it finalized a contract with the ICG to purchase a 77,800 square-meter plot belonging to the state-owned Incheon Terminal Complex that includes a seven-story building currently occupied by Shinsegae. The deal is worth 900 billion won ($833 million), up 24.9 billion won from the initial 875.1 billion won offered.

In September, Lotte won the right to buy the site located downtown, drawing a strong protest from Shinsegae.

``There is nothing wrong with the sales contract. We reflected the district court’s rulings in the latest agreement so that no legal problems will arise,’’ a spokesman for Lotte Department Store said. ``We will invest 1.2 trillion won to transform the site into a comprehensive shopping and leisure center equipped with a cinema, a discount store and other facilities.’’

The ICG also said it followed the court’s decisions by changing contract terms, stressing that the sale of the bus terminal complex is legitimate.

Soon after the initial deal, Shinsegae filed for an injunction with the Incheon District Court to prevent the ICG from selling the terminal to Lotte. The court ruled in favor of Shinsegae on Dec. 26 that the city cannot sell the site below its appraisal value through a private contract.

Following the ruling, Incheon raised the sales prices and changed other terms.

Shinsegae is calling the contract a ``grave violation’’ of business ethics and laws, demanding the ICG nullify the deal.

``The contract is clearly illegal. It is also proof that Incheon provided undue business favors to Lotte,’’ a spokesman for Shinsegae Department Store said. ``Incheon and Lotte disregarded the December court ruling that stated the sales agreement is legally flawed.’’

The spokesman said Shinsegae will take all possible legal action to invalidate what it calls a ``criminal act’’ against Incheon residents by providing a special favor to Lotte and giving up the chance to sell the terminal at a higher price.

If the deal goes through, Shinsegae will have to pay rent of some 15 billion won to its archrival each year until 2017 when its lease expires and move out that year. Lotte is expected to open its department store there around the same time.

Shinsegae opened the department store there 15 years ago based on a long-term rental contract with the ICG. The Incheon store posted 760 billion won in sales in 2011, accounting for 14 percent of the entire sales of Shinsegae Department Stores nationwide.