Seoul and Gyeonggi-do 'Jisik Sanup Center' Development PF Boom

[Asia Economy Reporter Lim Jeong-su] Project financing (PF) for the construction of knowledge industry centers in Seoul and Gyeonggi-do is flooding the market. This is interpreted as an increase in knowledge industry center development projects as an alternative investment destination due to regulations on owners of two houses per household.

According to the investment banking (IB) industry on the 6th, the developer Daewon Miraero Co., Ltd. received PF loans worth 150 billion KRW from a lending consortium including Shinhan Bank. The loans were executed in tranches according to repayment priority: senior tranche of 100 billion KRW, mezzanine tranche of 40 billion KRW, and junior tranche of 10 billion KRW.

The procured funds will be used for the construction of the 'Hyundai Terra Tower' knowledge industry center in Haan-dong, Gwangmyeong. This knowledge industry center is a large-scale facility with five basement floors and 16 above-ground floors, totaling a gross floor area of 99,815 square meters (31,940 pyeong). Hyundai Engineering is responsible for construction and guarantees completion. If building occupancy approval is not obtained within 35 months after PF loan execution, the developer has agreed to assume the repayment obligation on behalf of the borrower.

On four parcels including 304 Haan-dong nearby, the 'Gwangmyeong Tiamo IT Tower' knowledge industry center is also securing PF loans and conducting sales. This complex, developed by Daon General Construction Co., Ltd. and constructed by Poongsan Construction Co., Ltd., consists of four basement floors and 16 above-ground floors, with a total gross floor area of 56,670 square meters (17,173 pyeong) and 458 units.

Additionally, Shinyangsan Industrial Co., Ltd. received PF loans amounting to 107 billion KRW from a lending consortium including KB Securities. The loan has a three-year maturity with a bullet repayment condition. The plan is to construct and sell a knowledge industry center on a 3,404 square meter site at 449-12 Gayang-dong, Gangseo-gu, Seoul, consisting of five basement floors and 15 above-ground floors, with a total gross floor area of 30,577 square meters (9,266 pyeong).

During the loan process, Shinyangsan Industrial provided the Gayang-dong land as collateral to the lending consortium. The loan was divided into senior tranche of 81 billion KRW, mezzanine tranche of 16 billion KRW, and junior tranche of 10 billion KRW according to collateral and repayment priority. The procured funds will be used for construction costs and other expenses related to the knowledge industry center project. Ace Construction is the contractor and has committed to responsible completion within 30 months after loan execution, targeting completion in October 2023.

Earlier in May, Terra Development Co., Ltd., the developer of Namyangju Byeollae Hyundai Greenery, received PF loans worth 105 billion KRW from a lending consortium including Mirae Asset Securities. The loans were structured into senior tranche (Tranche A) of 78 billion KRW, mezzanine tranche (Tranche B) of 17 billion KRW, and junior tranche (Tranche C) of 10 billion KRW.

Furthermore, knowledge industry center developments are progressing in areas such as Hang-dong in Guro-gu and Sangam-dong near Mapo-gu, with related PF financing being actively secured. An IB industry official said, "Due to the effect of the regulation on owners of two houses per household, demand for alternative investment destinations is increasing, leading to many knowledge industry center development projects around large apartment complexes," adding, "Along with logistics complex development, related financing is also on the rise."