|Majang Premium Service Area in Icheon, Gyeonggi Province / Courtesy of Daebo Distribution|
Rent conflict causes closure of Korea's largest expressway rest area
By Park Jae-hyuk
Macquarie has become embroiled in another controversy here lately, after the tenant of Korea's largest expressway rest area owned by the Australian asset management company cited excessive rents as the main reason for its unilateral decision to close the facility.
According to the Ministry of Land, Infrastructure and Transport, Sunday, restaurants, convenience stores and restrooms in Majang Premium Service Area in Icheon, Gyeonggi Province, have been unavailable since June 14.
The facility's tenant, Daebo Distribution, argued that the high rent made it impossible for the company to continue its operation.
"Due to the excessively high fixed rent that surpassed 50 percent of our sales, we have had to endure 12.1 billion won ($10 million) in losses over the past three years and 10 months," the tenant wrote on a banner that was put up at the rest area.
After taking over the facility's owner Hiplex for 60 billion won in 2017, Macquarie decided to rent the property space to Daebo until 2038. The annual rent was 2.8 billion won in 2017.
Daebo paid the rent by sharing a certain proportion of its sales with the landlord. However, the contract also specified at least a 3 percent annual hike, so that Macquarie could be guaranteed a minimum profit regardless of earnings from the facility.
As a result, Daebo paid 6.5 billion won, or 54.3 percent of its annual sales, to Macquarie last year; putting the latter's net profits at 12.6 billion won over the past three years, while Daebo suffered a similar amount in losses.
Although the minimum wage hike, the COVID-19 pandemic and the shutdown of Lotte Mart in the rest area last September caused a sharp decline in Daebo's earnings from the service station, Macquarie refused to accept a request from the tenant to revise the contract.
|Macquarie Group headquarters in Sydney / Yonhap|
In a statement published under the name of Hiplex, Macquarie criticized Daebo for abruptly closing the facility amid the ongoing trilateral negotiations among the landlord, the tenant and the Korea Expressway Corp.
"Because Daebo illegally locked the restrooms, we applied for an injunction on June 15 to ask the court to order it to unlock the facility," the statement read. "We urge Daebo to resume its operations immediately and to participate in the negotiations sincerely."
However, Macquarie has failed to receive support from the public, who have complained about the foreign firm charging higher prices for facilities it has managed in Korea, such as Seoul Subway Line No. 9, the Incheon International Airport Expressway and Woomyunsan Tunnel.
Despite the growing calls from expressway users to resolve the conflict, the land ministry and the Korea Expressway Corp. have remained reluctant to get involved in the matter, saying it was basically a contractual dispute between private companies.