[The Era of Urban Maintenance Trusts②] The 'First' Completion by Trust Method vs Seoul's 'No.1' Project Site, Diverging Fortunes

Faster and More Professional Than Cooperative Method
But Not All Trust Methods Are Successful

First Completed Trust Method Projects: Seonggwang, Hogye, Silla
Leveraging Advantages to Move In Within 40 Months
Meanwhile, Seoul's First Yongsan Hanseong Apartment
Ends Up Using Cooperative Method After Conflicts and Project Delays

[Asia Economy Reporter Hwang Seoyul] The trust-type redevelopment project is considered to be able to proceed more quickly than the union-type project based on expertise. However, not all trust-type projects lead to success. The ‘Seonggwang·Hogye·Shilla Apartment Reconstruction Redevelopment Project’ in Anyang, Gyeonggi Province, utilized the advantages of the trust-type redevelopment project to become the first to complete a trust-type redevelopment project. On the other hand, Yongsan Hanseong Apartment, which was the first in Seoul to choose the trust-type, eventually switched to a union-type redevelopment project after sluggish progress. To successfully carry out a trust-type redevelopment project, the relationship between landowners, the union, and the trust company appears to be of utmost importance.

First Completion of Trust-Type ‘Seonggwang·Hogye·Shilla’... Actively Utilizing Trust Company Advantages

Before the reconstruction maintenance project of Seonggwang, Hogye, and Silla Apartments in Anyang-si, Gyeonggi Province / Photo by Koramco Asset Trust

Koramco Asset Trust, the project agent for the Seonggwang·Hogye·Shilla Apartment Reconstruction Redevelopment Project in Anyang, Gyeonggi Province, received the project agency completion notice from Anyang City in April 2020. This marked the completion and move-in about 40 months after the project agent was selected in December 2015. According to Koramco Asset Trust, this site was the first project to receive the project agency completion notice under a trust and also the first trust-type redevelopment project to be completed.

The complex, which originally had 17 buildings and 112 households, was renovated under the name ‘Pyeongchon Daeseong United’ and reborn as a complex with 203 households ranging from 2 basement floors to 26 floors above ground.

The project had been stagnant for about eight years since the union was approved in August 2007. The union, mostly composed of non-experts, struggled with financial issues, permits, and negotiations with the construction company, causing the project to stall.

The appearance after the reconstruction maintenance project of Seonggwang, Hogye, and Silla Apartments in Anyang-si, Gyeonggi / Photo by Koramco Asset Trust

The atmosphere changed when the trust company got involved. Since the union approval had already been obtained, the union chose the project agency method for the trust-type redevelopment project. As a redevelopment expert, the trust company had advantages over the union in tasks such as re-obtaining or modifying permits and negotiating with the construction company. This allowed for rapid progress in all stages of the redevelopment project, including budget adjustments, construction, demolition, and relocation.

The trust company’s higher credit rating compared to the union also worked as an advantage. From the perspective of the main lenders, it is often difficult to make judgments when union members apply for loans. In this case, since the construction company was not clearly decided at the time, loans through the construction company were also difficult.

With the trust company’s involvement, financial institutions perceived the project as ‘a project managed by a trust company,’ which made financial support easier. According to industry insiders, the trust company had a higher credit rating than the union, enabling loans to be obtained under better conditions and at lower interest rates.

A Koramco Asset Trust official said, "What was most important was mutual trust." He explained, "The cooperative relationship between the trust company and landowners is the most important. Although the project was carried out in a new way at the time, thanks to the trust placed by union members, it took less than four years from relocation and demolition to move-in."

Seoul’s First Yongsan ‘Hanseong Apartment’, After Conflict and Project Stagnation, Ultimately Returns to Union

On the 23rd, at 'Hanseong Apartment' in Yongsan-gu, Seoul, a banner announcing the inaugural general meeting of the Street Housing Maintenance Project, not the existing small-scale reconstruction project, was displayed. Photo by Hwang Seoyul

Yongsan Hanseong Apartment, Seoul’s first trust-type reconstruction project, held a founding general meeting for the union on the 3rd to switch from a small-scale reconstruction project implemented by Korea Trust to a union-type street house redevelopment project. This was a continuation of the resolution made at the landowners’ general meeting held in March last year regarding ‘project method change’ and ‘project entity decision’ agenda items.

Located in a high-end villa residential area in Yongsan-gu, ‘Hanseong Apartment’ was completed in August 1974 and is Seoul’s first trust-type reconstruction project. After receiving a D grade in the safety diagnosis evaluation in 2013, a reconstruction union promotion committee was formed in 2015. However, in July 2016, an opinion to change the project implementation method was passed at a residents’ general meeting, and in October of the same year, Korea Trust was designated as the project implementer.

Contrary to expectations, the project made no progress for a long time after the trust company was designated as the implementer. The prolonged stagnation was partly due to conflicts between the trust company and the union. At the ‘3rd Landowners’ General Meeting’ held in May 2017, Korea Trust, the implementer, passed an agenda to amend the project implementation contract, including increasing the trust fees. As a result, the trust fee was raised from 800 million KRW to 2.2 billion KRW, and the project cost limit and borrowing interest rate were also increased from 600 million KRW and 3.5% to 10 billion KRW and 7%, respectively.

Some residents voiced opposition due to concerns that the increased fees payable to the trust would lead to additional contributions. Although the project seemed to resume with the selection of a construction company, no further news was heard.

Expected bird's-eye view after the horizontal housing maintenance project posted at the entrance of 'Hanseong Apartment'/Photo by Hwang Seoyul

Residents of Yongsan Hanseong Apartment appear to have decided to suspend the trust-type small-scale reconstruction project due to sluggish progress and project feasibility. According to a Yongsan District Office official, "There is a reconstruction burden, and from a profitability perspective, the street house redevelopment project is better, so the decision was made to change the project method."

The Hanseong Apartment Street House Redevelopment Project Promotion Preparation Committee stated that they are collecting materials related to this general meeting and preparing to apply for union establishment approval.