"If You Do It, So Do I"... Hannam 2 District, Unprecedented Proposal Competition

Business Conditions and Design Proposals Overflowing, Difficult to Rank

Comparison Table of Bid Proposals for Hannam District 2. [Source=Hannam District 2 Association]

[Asia Economy Reporter Cha Wanyong] This year’s biggest maintenance project in the second half, the redevelopment project of Hannam 2 District in Yongsan-gu, Seoul, has received unprecedented proposals. As Lotte Construction and Daewoo Construction compete for the construction rights, the competition has intensified as both companies matched or offered better terms in response to each other’s bold proposals.

According to the comparison table of bid proposals from No. 1 Lotte Construction and No. 2 Daewoo Construction, released by the Hannam 2 District Redevelopment Association on the 16th, the project conditions and design plans are difficult to distinguish in superiority.

First, both Lotte Construction and Daewoo Construction aligned the construction costs for the original and alternative designs with the estimated price set in the association’s bid announcement. The total construction cost is 790.86 billion KRW. For relocation costs, Lotte Construction proposed an LTV of 140% totaling 3 trillion KRW, while Daewoo Construction proposed an LTV of 150%. Regarding interest rate conditions on relocation costs, Lotte Construction guaranteed the lowest interest rate within Hannam New Town, and Daewoo Construction proposed to procure the lowest interest rate through competitive bidding among financial institutions.

For project expenses, Lotte Construction proposed a total of 1 trillion KRW including project promotion costs. Daewoo Construction promised to lend the entire project expenses as approved by the general meeting. The interest rate conditions were the lowest interest rate within Hannam New Town for Lotte Construction and the lowest interest rate through competitive bidding among financial institutions for Daewoo Construction.

Regarding the burden of costs, Lotte Construction specified that there would be no financial procurement by the demanders, with a condition that 100% payment is made four years after move-in, and Lotte Construction bears the financial costs until move-in. Daewoo Construction offered a condition where demanders can choose to pay 100% either at move-in or two years after move-in through financial procurement.

Both companies proposed construction contract conditions with no increase in construction costs until the construction start date (January 2025). Additionally, there will be no increase in construction costs due to geological conditions or inflation after actual construction starts. The construction start time is within four months after relocation completion for Lotte Construction and within six months for Daewoo Construction. The construction period is proposed as within 37 months after start for Lotte Construction and within 43 months for Daewoo Construction.

In terms of sales responsibility/conditions, both companies presented identical conditions that in case of unsold units in apartment housing, 100% compensation will be made in kind at the initial general sale price, and the sales timing will fully accept the association’s decision.

For commercial facility sales conditions, Daewoo Construction proposed maximizing sales revenue through highest bid competitive auctions, while Lotte Construction proposed either bulk sale or sale after two years of responsible operation by Lotte, showing a difference. Additionally, Lotte Construction promised to partner with Lotte Group affiliates such as Lotte Cinema for store openings.

The design conditions are also bold for both companies. Both Lotte Construction and Daewoo Construction participated in the bid proposing their high-end brands ‘LeaL’ and ‘Summit’ respectively. Lotte Construction proposed the complex name ‘LeaL Palatino’ and Daewoo Construction proposed ‘Hannam Summit’.

Lotte Construction plans to apply hotel-style design to Hannam 2 District. Lotte Construction aims for ‘BETTER THAN HOTEL’, creating a comfortable and safe residential space through top-class hotel-style design. A collaboration of nine people including global design group HBA and architect Choi Siyoung will apply luxury design. It includes a hotel-style community of about 4,000 pyeong, hotel-style convenience services such as security systems, butler zones, breakfast, laundry, housekeeping, and operation of a health promotion center within the complex in cooperation with Soonchunhyang University.

Daewoo Construction also plans to apply innovative design to Hannam 2 District. Daewoo Construction separately proposed the ‘118 Project’ to supplement issues in the original plan. Daewoo Construction intends to completely revise the ‘ㄷ’, ‘ㄹ’, and ‘ㅁ’ shaped main building arrangements of the original design and reduce the building coverage ratio from 32% to 23%. Furthermore, based on the ‘2040 Seoul Urban Basic Plan’, they plan to apply a maximum floor height increased by seven floors from the original 14 floors to 21 floors.

For landscaping construction costs, Lotte Construction proposed at least 1.5% of the total construction cost, and Daewoo Construction proposed more than 4% of the total construction cost.

Meanwhile, the Hannam 2 District redevelopment project is a project to build 1,537 apartment units in 30 buildings ranging from six basement floors to 14 above-ground floors, along with ancillary facilities. The general meeting for selecting the construction company is scheduled for the 5th of next month.