[PF] Hoban Construction-Buguk Securities, 135 Billion KRW Financing for Daejeon Yongsan Development

Daejeon Daedeok District Development Project Gains Momentum
Speculative Overheating Zone Designation and COVID-19 Variables

[Asia Economy Reporter Lim Jeong-su] Daejeon Yongsan Development, a project developer affiliated with Hoban Group, has raised 135 billion KRW in project financing (PF) funds. In this process, Hoban Construction provided credit support by taking final responsibility for the debt, facilitating the fund procurement. Bukook Securities is expected to realize profits through PF underwriting and acquisition fees, as well as development gains from equity investments.

According to the investment banking (IB) industry on the 24th, Daejeon Yongsan Development raised 135 billion KRW in PF funds under the management of Bukook Securities. The maturity is 3 months, with a lump-sum principal repayment scheduled for November. The loan can be extended until August next year. Bukook Securities issued short-term bonds backed by the loan principal and interest as underlying assets to secure PF loan funds.

Daejeon Yongsan Development is advancing a project to build 3,538 housing units (apartments) in Daedeok District, Yongsan-dong, Yuseong-gu, Daejeon. The project covers a total land area of 359,942㎡ (approximately 108,880 pyeong) and will supply general sale housing (such as Hoban Summit) and publicly supported private rental housing with a total floor area of 600,362㎡ (approximately 181,600 pyeong). Hoban Construction is participating as the contractor.

Hoban Construction has agreed to take final responsibility for Daejeon Yongsan Development’s PF debt. If problems arise in the project making it difficult for Daejeon Yongsan Development to repay the loan (loss of benefit of term), Hoban Construction will purchase the land secured as PF collateral and assume the debt. If no loss of benefit of term occurs during the loan period and a financial institution with a credit rating equal to or higher than Hoban Construction’s acquires the PF securitized bonds, the PF can be extended until August next year.

Daejeon Yongsan Development’s capital is 1 billion KRW, issuing 874,000 common shares and 126,000 non-voting preferred shares. Among these, Hoban Construction and Bukook Securities hold 80% and 20% of the common shares, respectively. Bukook Securities also holds all the preferred shares. Although preferred shares have no voting rights, they have priority in dividends, allowing for preemptive securing of development gains.

The project faces both favorable and unfavorable factors. The Hyundai Premium Outlet is scheduled to be built within Daedeok District, causing surrounding land prices to rise. Additionally, infrastructure expansion such as the riverside expressway has increased the project’s chances of success. However, loan regulations due to the designation of the area as a speculative overheating zone and the spread of COVID-19 could dampen the enthusiasm for sales.

An IB industry official said, "While Hoban Construction and Bukook Securities can expect development gains through proactive equity investments, it is difficult to ignore variables such as various real estate regulations."