[Exclusive] Cheonhwadongin No.4, Which Pocketed 100 Billion Won, Spent 23.2 Billion Won on SG&A Expenses Last Year

85% Paid as Commission Fees
Matches Hwacheondaeyu's Expenditure Over 6 Years

[Asia Economy Reporters Jang Hyowon and Jo Gangwook] NSJ Holdings (formerly Cheonhwadongin No.4), which participated in Seongnam Daejang-dong development project operator ‘Seongnam Eutteul’ and received 100 billion KRW in dividends, reportedly spent over 23 billion KRW on selling and administrative expenses (S&A expenses) last year. Notably, 85% of these S&A expenses were paid as fees, including legal and accounting advisory fees. This amount matches the total fees paid by Hwacheon Daeyu, the asset management company (AMC) of the Daejang-dong development, over the past six years.

According to the financial statements of NSJ Holdings obtained by Asia Economy on the 29th, the company spent a total of 23.2 billion KRW on S&A expenses last year. S&A expenses refer to costs necessary for selling goods, excluding product costs, such as employee salaries, severance pay, entertainment expenses, and promotional costs. NSJ Holdings is the renamed entity of ‘Cheonhwadongin No.4,’ whose real owner is known to be lawyer Nam Wook, who played a key role in the Daejang-dong development project.

In the company’s financial statements, the ‘fees paid’ item alone accounts for 19.7 billion KRW, or 85% of total S&A expenses, excluding salaries (2.5 billion KRW) and others (1 billion KRW). An industry insider explained, “Fees paid include various expenses such as maintenance fees for supplies, remittance fees, credit card payment fees, and patent royalties, but legal and accounting advisory fees constitute the largest portion.” This amount is more than twice the total fees paid by Seongnam Eutteul over the past five years, which amounted to 10.5 billion KRW.

What draws attention is that this amount matches the fees recorded by Hwacheon Daeyu over the past six years. Hwacheon Daeyu spent 802.44 million KRW in 2015, 710.62 million KRW in 2016, 1.31203 billion KRW in 2017, 6.52735 billion KRW in 2018, 5.5511 billion KRW in 2019, and 4.85797 billion KRW in 2020, totaling approximately 19.7 billion KRW in fees paid. Notable figures who have been listed as advisors to Hwacheon Daeyu include former Supreme Court Justice Kwon Soon-il, former Prosecutor General Kim Sunam, former Special Prosecutor Park Youngsoo, former Prosecutor General Kang Chanwoo, former Future Korea Party leader Won Yucheol, lawyer Lee Kyungjae, and former Vice President of Foreign Exchange Bank Lee Hyunju. Due to this, the industry speculates that a significant portion of the fees paid may have been used for legal or accounting advisory services.

Previously, NSJ Holdings received dividends of 47.1 billion KRW in 2019, 36.1 billion KRW last year, and 17.5 billion KRW this year from Seongnam Eutteul. After investing 87.21 million KRW in capital to acquire 17,442 shares of Seongnam Eutteul in 2016, the company collected a total of 100.7 billion KRW in about five years. Of this, approximately 70 billion KRW has already been withdrawn from NSJ Holdings. As of the end of last year, the company’s total capital stood at 30.7 billion KRW. The company’s structure is such that it has been maintained almost solely through dividends, with little profit generated from its own business over the past five years. Dividends received from Seongnam Eutteul are included in retained earnings within total capital.

The company’s net income was in the red by around 1 million KRW from 2016 to 2018 but surged by 44,385% year-on-year to 44.2 billion KRW in 2019. However, it recorded a net loss of 13.5 billion KRW last year.

Additionally, short-term loans amount to 19.7 billion KRW, of which 8.7 billion KRW has been set aside as allowance for doubtful accounts. This means that 8.7 billion KRW of the lent money is classified as ‘uncollectible.’ It is unknown to whom the money was lent. Meanwhile, lawyer Nam is reported to have recently purchased a building worth approximately 30 billion KRW in Gangnam through another of his corporations.