HYBE Controversy over Rent Payment for CEO-Owned Real Estate
It has been pointed out that Scooter Braun, CEO of HYBE America, purchased personal real estate and received rent from the company after joining HYBE. The reason he purchased the real estate was to provide a space for active exchange between famous artists affiliated with Ithaca Holdings and HYBE.
However, it was revealed that artists who had actively built a network left the company after the merger with HYBE, and that they were not properly fulfilling the roles expected of them. There are also doubts about whether it was an appropriate decision for the company to pay rent for the CEO's personal real estate.
According to the relevant industry on the 18th, HYBE spent 3.7 billion won from last year to the third quarter of this year on real estate purchases with its special affiliate 3355 BARNARD, LLC (hereinafter referred to as 3355 BARNARD). In addition to spending a total of 2.5 billion won last year and 1.2 billion won in the third quarter of this year, it spent 21.9 billion won last year alone to acquire other intangible assets.
The total use of the 25.6 billion won has not been disclosed. However, considering that HYBE purchased the real estate through a limited liability company (LLC) called 3355 Bernard after appointing Braun as an inside director last year and that it intended to use the real estate as a space for artist exchange, it is presumed that the funds were for rent on Braun’s personal real estate and incidental expenses related to artists affiliated with HYBE America. 3355 Barnard began to appear early last year when many foreign media outlets covered CEO Braun’s real estate acquisition.
According to foreign media, Braun purchased a 2,230㎡, 4-story building located at 3355 Bernard Street in Santa Monica, Los Angeles, USA, for 26 million dollars (36.2 billion won) in March of last year. The company that sold the property to Braun at the time was 3355 Barnard. The building, built in 1927, features a brick exterior and a rooftop and lounge where guests can enjoy the view of the adjacent beach, foreign media reported.
Considering that 3355 Barnard appears in HYBE's other special related parties, it is presumed that Braun acquired the real estate by acquiring 3355 Barnard's shares. Considering that the transaction with 3355 Barnard appears only in the transactions with special related parties on a consolidated basis, it is interpreted that the rent for using the building was paid to 3355 Barnard through HYBE America.
Braun planned to make this building a space where various people could interact, including big-name artists such as singer Justin Bieber, Taylor Swift, and Ariana Grande, as well as artists affiliated with HYBE. It is said that HYBE also expected this synergy and willingly paid rent to Braun.
Contrary to expectations, there was little synergy. The company was sold to HYBE America, and immediately after, many of its artists left, and Braun's plans were left half-baked. Representative examples include Ariana Grande and musical actress Idina Menzel, known for her role in the movie "Frozen." They terminated their contracts with SB Projects, a subsidiary of Ithica Holdings, last year. In addition, Demi Lovato and J Balvin have announced their breakups with Braun.
An industry insider pointed out, "Although HYBE took an active approach by investing 1 trillion won to acquire HYBE America, it ended up only increasing Braun's wealth," adding, "HYBE America, which was unable to utilize Braun's global network, is suffering from net losses."
As of the end of last year, HYBE America's net loss was 142.4 billion won. The deficit has been increasing for three consecutive years, following 8 billion won in 2021 and 74.8 billion won in 2022.
A HYBE official said, "This is a matter related to a U.S. corporation that is not required to make domestic disclosures," and "It is difficult to respond to related matters as it would take a considerable amount of time to confirm the details."
