Lotte wants new 50-year lease to turn profit with Lotte Mall Hanoi
Nearly two years after acquiring the largest trade centre in Hanoi from Citra West Lake City Development Co., Ltd., Lotte Group has yet to break ground on its Lotte Mall Hanoi, as the remaining period of operations is too short to turn a profit.
Sim Young Woo, general director of Lotte Properties Hanoi Co., Ltd., said at a meeting with the Ministry of Planning and Investment (MPI) last week that the Lotte Mall Hanoi project has received the permit to adjust the planning and expects to put it into operation by 2022. However, the foundation, constructed by the original investor Citra West Lake, leaves a lot to be desired, meaning the company has to tear it down and build a new one.
“We will develop the project from the foundation up, and we will have to return the land to the government in 2046, in line with the original contract with Citra West Lake. That means it will be very difficult to make a profit within the 24 years of operation remaining after being put into operation,” Woo said.
Therefore, the representative of Lotte Properties Hanoi proposed for a new 50-year contract for the project in order to make it profitable.
MPI called on Lotte Properties to develop the project until 2046, in accordance with the original contract. The extension of the contract musst be approved by the government.
Numerous sub-projects of the 394-hectare Ciputra Hanoi International City project – buildings, shopping and entertainment centres, hospitals, and school projects – are still pending.
In order to avoid making losses or having its investment stagnate, Lotte Properties Hanoi will need the support of MPI and other ministries and relevant agencies to find new solutions for the long-term operation of the project.
Citra West Lake leased the 7.2ha of land for 50 years, from 1996 to 2046, with a total expected investment of around $132 million. The Ciputra Hanoi Mall project started construction in 2010 and has been delayed since 2012, after constructing the foundation.
In 2016, Lotte Group acquired the project from Citra West Lake and renamed it Lotte Mall Hanoi. The group intended to pour around $600 million into Lotte Mall Hanoi, upgrading it to make it a hotel, apartment, office, and trade centre complex instead of the initially planned $300 million trade centre. The project was expected to become a landmark of western Hanoi.
Lotte Mall Hanoi is part of Ciputra Hanoi International City, located on Lac Long Quan street, the gateway to the south of the city, and is one of two major projects that Lotte Group is developing in Vietnam, the other being Eco Smart City in Ho Chi Minh City, which is expected to break ground this September and be completed in 2024.
In 2014, Lotte Center Hanoi on Lieu Giai street was inaugurated after five years of construction. The total registered investment of Lotte Group’s three major real estate projects is estimated at $2 billion.
After 22 years in Vietnam, Lotte Group has 16 subsidiaries, four factories, and 280 retail stores, covering various fields in Vietnam, such as super markets, cinemas, trade centres, hotels, real estate, as well as processing and manufacturing.