Gangnam Ultra-Luxury Residential-Commercial Complex 'Eterno Cheongdam' 140 Billion PF

Investor Recruitment Led by Eugene Investment & Securities
Hyundai Construction Provides Credit Including Debt Assumption

[Asia Economy Reporter Lim Jeong-su] Project financing (PF) funding for the construction of 'Eterno Cheongdam (Cheongdam The One),' considered the most luxurious residential facility in Gangnam, has been successfully secured. The project developer, Nexplan Co., Ltd., has selected Hyundai Construction as the contractor and plans to complete the residential-commercial complex construction by January next year. After nearly 20 years of repeated project delays and cancellations, the project is now resuming in earnest.

According to the investment banking (IB) industry on the 27th, Nexplan raised 140 billion KRW in PF loans today under the lead of Eugene Investment & Securities. The loan maturity is one year, with principal and interest repayment due in January next year. The principal is to be repaid in a lump sum at maturity, but the interest for one year is prepaid. Notably, the interest prepaid by the developer was calculated using the double-inclusive method.

The double-inclusive method includes both the loan date and the repayment date when calculating interest on a daily basis. Compared to the single-inclusive method, which includes only one of these dates, it results in higher interest income. Although the double-inclusive method is not illegal, financial supervisory authorities have discouraged its use in the banking sector, considering it an unfair collection of overdue interest, and it has almost disappeared in the financial industry. An IB industry insider said, "It is a method rarely used even in PF," adding, "There must have been special circumstances."

Nexplan will use the raised funds for the construction of Eterno Cheongdam. This project is being built on a 3,202㎡ (approximately 969 pyeong) site at 106-7 Cheongdam-dong, Gangnam-gu, Seoul, as an ultra-luxury residential facility with four basement floors and 20 above-ground floors. It consists of four duplex apartments of 83 pyeong, 22 single-floor apartments of 74 pyeong, two duplex luxury penthouses, and a 142-pyeong duplex super penthouse. The price per pyeong is the highest in Korea, ranging from 160 million to 210 million KRW, with units being sold at approximately 10 billion to 30 billion KRW each.

During the funding process, Hyundai Construction, the contractor, provided credit support such as a capital replenishment agreement and conditional debt assumption. If the developer fails to repay the loan on time or lacks repayment funds, Hyundai Construction will supplement the funds, and if it fails to do so, it will assume the debt cumulatively. Hyundai Construction began construction in November last year and is proceeding with the goal of completion in 2023.

This project has experienced ups and downs and continuous delays for about 20 years. It was initially promoted as a development project on the site of the former Citi Apartments in Cheongdam-dong, Gangnam-gu, in the 2000s but was canceled once due to the Lehman Brothers crisis. Later, in 2017, the developer One H received equity investment from Hong Kong-based Tianli and attempted to restart the project, but it was canceled again due to adverse factors such as excessive high prices, competition with Nine One Hannam in Hannam-dong, and PF loan defaults.

At that time, the project attracted attention as figures such as the chairman of Mirae Asset Financial Group, the vice chairman of Samtan, and famous celebrities applied for units, focusing public interest on the project's success. The chairman of One H, the project owner, is reported to be evading overseas amid disputes with Tianli, the equity investor. An industry insider evaluated, "As land prices in the Cheongdam-dong area have risen significantly and demand for luxury housing has increased, project conditions have improved," adding, "The likelihood of project success is greater than in the past."