[Asia Economy Reporter Choi Eun-young] Former basketball player and broadcaster Seo Jang-hoon is reportedly facing the risk of losing billions of won.
On the 15th of last month, the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government announced eight candidate sites for the first pilot project of public redevelopment.
The eight 'public redevelopment project sites' in Seoul, where stagnant maintenance zones are developed with public participation, are Heukseok 2 in Dongjak-gu (1,310 households), Yangpyeong 13 (618 households) and Yangpyeong 14 (358 households) in Yeongdeungpo-gu, Yongdu 1-6 (919 households) and Sinseol 1 (279 households) in Dongdaemun-gu, Bongcheon 13 (357 households) in Gwanak-gu, Sinmunno 2-12 (242 households) in Jongno-gu, and Gangbuk 4 (680 households) in Gangbuk-gu.
According to media reports such as Ilgan Sports, the problem is that Seo Jang-hoon's building is located in one of these areas, Heukseok 2 in Dongjak-gu. The Heukseok 2 redevelopment promotion committee applied for the 'public redevelopment contest' and was selected.
Mr. Seo purchased a building in Heukseok-dong, consisting of two basement floors and seven above-ground floors, in 2005. The purchase price at that time was about 5.8 billion won, and it has now risen to about 12 billion won.
However, once the redevelopment project begins, the existing building must be demolished and rebuilt. Mr. Seo's building, valued at around 12 billion won, will inevitably have to be torn down.
Building owners like Mr. Seo can later receive new apartments or commercial spaces through allocation. However, since one person cannot receive multiple units, the remainder must be settled in cash.
Another issue is that compensation is based on the appraised value rather than the market price. As a result, Seo Jang-hoon will not be recognized for the full value of 12 billion won and will suffer losses amounting to billions of won. Compensation based on appraised value results in significantly greater losses compared to market price, because public redevelopment policies focus more on increasing supply rather than aligning with market interests.
It is reported that Mr. Seo currently receives a monthly rent of 30 million won from the Heukseok-dong building. If compensation is based on appraised value rather than market price, it will be difficult to cover losses from rental income. Since redevelopment completion is expected to take 2 to 3 years, rental income losses during this period are estimated to be around 500 million won.
Tenants who have leased commercial spaces can receive partial cash compensation under the Urban and Residential Environment Improvement Act, but building owners receive no compensation for lost rental income.
In 2014, Seo Jang-hoon appeared on MBC's 'Radio Star' and expressed his views on the rental business. / Photo by MBC 'Radio Star' broadcast screen capture
Meanwhile, Seo Jang-hoon stated in a 2014 broadcast, "I consider leasing business as the fruit of my 30-year basketball career. This is not something stolen or something I did wrong. I hope to become a good landlord who aligns with social justice." He became known as a 'good landlord' for renting at prices lower than the surrounding market rates, which attracted attention.
In March last year, he also participated in a rent reduction campaign to support small business owners hit hard by the COVID-19 crisis. He reduced rent by 10% for two months for tenants in the food service businesses at his three buildings located in Seocho-dong, Seocho-gu; Heukseok-dong, Dongjak-gu; and Seogyo-dong, Mapo-gu in Seoul.
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