There is a lot of talk about Lotte Group's crisis.

There is a lot of talk about Lotte Group's crisis. Some are worries based on facts, and most are jirashi based on groundless rumors. Lotte is clearly not at the level of bankruptcy overnight.

What is clear is that Lotte's prospects are dark.

Lotte Chemical, which is in charge of the group, is scheduled to lose money for three consecutive years due to China and Saudi Arabia's unresponsive expansion of naphtha production facilities, and even if business conditions rebound, prices of basic chemical products are expected to form at the break-even level due to rising utilization rates. Lotte Energy Materials, which was acquired for 2 trillion won to compensate for its portfolio that was too focused on basic chemical products, saw its growth slow down due to the slowing growth of the electric vehicle market. Under the current situation, Lotte Chemical's only profitability enhancement strategy is to expect to reduce fixed costs with assets that have ended the depreciation period while executing only facility investment that is essential for operation.

Distribution, another axis, also failed to come up with any significant answers while Coupang was rapidly encroaching on the e-commerce market. Not to mention that Lotte On is full of wrong decisions from planning to execution, and it can be said that it is an operating structure in which one has to rely on offline assets. There is no reason to go to the mart for daily necessities or food, and department stores where consumption experience is important are relatively good. Even so, due to the polarization of income by region and the overall sluggish domestic economy, sales are growing backward except for key branches such as Jamsil branches and headquarters.

At this point, the asset to pay attention to is Lotte REITs. Lotte securitized only non-core real estate assets while making Lotte REITs. It did not include Jamsil Lotte Town, Seocho Lotte Chilsung Logistics Center, and Sogong-dong Hotel/Department Store at all. Since most of the assets are real estate owned by Lotte Shopping and Lotte Global Logistics, the value of Lotte REITs is ultimately based on Lotte Shopping's ability to generate cash. This year, Lotte Shopping is expected to have an operating profit of more than 500 billion won, showing good performance year-on-year. Therefore, looking at this number alone, there is no reason to worry too much. What is curious is the performance by asset. Performance may vary depending on internal accounting standards, but the degree of filial piety and poorness by asset in Lotte will already be distinguished. Looking at the assets held by Lotte REITs, the lease contract expires in 2030, and if the group reorganizes its portfolio based on profitability in the future, it is highly likely that the group will restructure some of the assets that are liquidated before the net real estate owned by 100%.