Samsung C&T "Banpo 3rd District, 100% Sale After Completion... Responsible for Project Cost and Financing"

Perspective View of Banpo 3rd District

[Asia Economy Reporter Moon Jiwon] As the general meeting for selecting the construction company for Banpo Jugogu 3rd Complex (Banpo 3rd Complex), considered the biggest reconstruction project in the Gangnam area in the first half of this year, approaches in Seoul's Seocho-gu, competition among construction companies is intensifying. Samsung C&T is attracting attention by making bold proposals such as '100% post-completion sale' and 'shortening the construction period.'

According to industry sources on the 29th, as the recently implemented price ceiling system for pre-sale prices has emerged as the biggest obstacle in promoting redevelopment projects, construction companies are rushing to propose 'post-sale' methods that can mitigate the impact of the price ceiling. Previously, the 'pre-sale' method, where sales were conducted before the housing was completed, was widely used, but when the price ceiling system is applied, the sale price drops significantly below the nearby market price, causing profitability issues.

Pre-sale brings in funds such as interim payments during construction, but post-sale generates income only after completion, making the construction company's financial strength crucial. This is why the union increasingly emphasizes the construction company's stable financing ability when selecting a contractor. In fact, the 'Shinbanpo 21st Complex,' which held its contractor selection meeting the day before, also chose a construction company that proposed post-sale.

Samsung C&T proposed '100% post-completion sale' for the Banpo 3rd Complex reconstruction project. Industry observers believe that proceeding with post-sale is advantageous since the official land price in Banpo 3rd Complex rose by 18.4% this year, and the government's policy to reflect realistic official prices is expected to continue.

Samsung C&T explained, "We proposed maximizing the union members' profits through post-completion sale in Banpo 3rd Complex," adding, "It is predicted that sales revenue will increase by approximately 250 billion KRW compared to pre-sale." Samsung C&T plans to take full responsibility for and secure all project costs, including necessary business expenses and construction costs, to support post-sale.

Unlike pre-sale, post-sale requires large-scale financing capabilities for project costs, construction costs, and relocation measures. Samsung C&T holds one of the lowest debt ratios among major construction companies and a high credit rating of AA+ for corporate bonds, enabling stable large-scale financing.

Samsung C&T also stated that it can provide funds to the union at a low interest rate of corporate bond (AA+) base rate + 0.25% (1.77% as of the 27th) without the guarantee of the Housing and Urban Guarantee Corporation (HUG).

Additionally, Samsung C&T proposed March 2024 as the actual move-in date for the Banpo 3rd Complex reconstruction project. The aim is to maximize union members' profits by shortening the project and construction periods.

A Samsung C&T official said, "We proposed a bold 100% post-completion sale, the best business method favorable to the union, for Banpo 3rd Complex, and plan to successfully lead the project through this approach."