[Asia Economy Reporter Lim Jeong-su] The Daol Co., Ltd., which is promoting the Yongin Wangsanjigu urban development project, has raised 262.1 billion KRW in funds. The raised funds will be used to repay existing loans borrowed for land acquisition and project expenses.
This project had been delayed for a long time but has recently gained momentum with the selection of a construction company. However, there is a possibility of further delays due to a dispute over project and construction rights with Hanwha Construction. Therefore, it is uncertain whether the main project financing (PF) of 700 billion to 800 billion KRW to secure construction costs can be successfully raised.
According to the investment banking (IB) industry on the 4th, Daol recently received a PF loan of 262.1 billion KRW from a consortium of financial companies. The loan maturity is six months, but it can be extended further. The consortium reportedly includes NH Investment & Securities and Meritz Financial Securities.
Daol is a project company established for the Mohyeon District urban development project in Wangsanni, Mohyeon-myeon, Cheoin-gu, Yongin-si, Gyeonggi-do. Hyunjin Everbill holds 100% of the shares. The project site covers a total area of 364,000㎡ and includes residential complexes, parks, green spaces, streams, and roads.
The raised funds will be used to repay existing borrowings. Daol signed a credit line agreement worth 242 billion KRW in April 2020 with Yongin Green Alpha Co., Yongin Green Beta Co., and Yongin Green Charlie Co. to finance land costs and initial project expenses.
The Wangsanjigu project has been continuously delayed since it was designated as an urban development zone in 2008. In 2014, Gyeonggi Province approved the project by increasing the floor area ratio from the original 200% to 230% to enhance project feasibility, increasing the housing supply from 2,925 units to 3,750 units. However, due to a sluggish housing market and deterioration of project feasibility, as well as the project company's insolvency, the project was postponed until recently.
The project, delayed for about 13 years, has recently gained momentum again with the selection of a construction company. Daol selected Hyundai Construction as the contractor in February. The contract amount is 711.8 billion KRW, classifying it as a large-scale development project. The project will proceed under the managed land trust method by Kyobo Asset Trust.
However, it is difficult to rule out the possibility of further delays due to disputes with Hanwha Construction. Hanwha Construction, the previous contractor, filed an injunction against the selection of the new contractor and won. The court suspended the effect of Daol’s termination notice of the contract with Hanwha Construction and prohibited Daol from entering into contracts or performing construction with third parties.
Therefore, it is uncertain whether the main PF to secure construction costs can be carried out. Daol plans to raise about 700 billion to 800 billion KRW after selecting Hyundai Construction as the contractor, but there is significant uncertainty regarding the contractor and other factors.
An IB industry official said, "The rise in real estate prices in the Yongin area has greatly improved the feasibility of the Wangsanjigu development," adding, "If the dispute with Hanwha Construction is smoothly resolved, the main PF financing can also be quickly completed."
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