Even the Bank of Korea Faces Setbacks Due to the 'PF Incident'... Private Contract for Sogong Annex Also Falls Through

Frozen Real Estate Financing Amid Legoland-Related PF Crisis
Bank of Korea's Sogong Annex Sale Fails Repeatedly for 6 Months

[Image source=Yonhap News]

As the real estate project financing (PF) crisis triggered by Legoland in Gangwon Province freezes the capital market, the Bank of Korea's plan to sell its annex building worth 147.8 billion won is also facing setbacks. The Bank of Korea recently entered into private contract negotiations with a company that expressed interest in purchasing the building, but the deal ultimately fell through due to difficulties in raising funds following the PF crisis. Since the Legoland incident, the Bank of Korea has faced challenges in asset sales amid a narrower scope for monetary policy operations.

According to the Bank of Korea and the real estate industry on the 2nd, the Bank of Korea has been accepting bids for a private contract sale of the Sogong annex building since the 28th of last month until today, but no buyers have come forward. If no applications are received by 4 p.m. today, the sale will fail again. Previously, in June, the Bank of Korea announced plans to sell the Sogong annex located in Jung-gu, Seoul, for 147.8 billion won and attempted public auctions twice through the Korea Asset Management Corporation's electronic asset disposal system (Onbid), but both attempts were unsuccessful.

The building was completed in December 1965 as the former Commercial Bank headquarters and was purchased by the Bank of Korea in March 2005 to expand office space. The Bank of Korea plans to complete the sale before the new integrated annex, currently under construction, is finished next year, as the Sogong annex will become vacant thereafter.

Despite this, the Bank of Korea has been unable to find a new owner for the Sogong annex for nearly six months, partly due to the real estate market downturn caused by consecutive base rate hikes, but the recent Legoland-related PF crisis has also had a significant impact. A Bank of Korea official stated, "Before the PF crisis broke out, a company submitted an application for a private contract and negotiations were underway, but the deal fell through due to the deteriorating PF market and the company's circumstances."

If the private contract fails, the Bank of Korea plans to obtain a new appraisal, last conducted in June of last year. At that time, two appraisal firms valued the building at 148.06896 billion won and 147.52011 billion won, respectively. Given the recent downturn in the real estate market, the overall market value of the building has declined, so the reappraised value is likely to be lower than the minimum bid price of 147.8 billion won. An industry insider in the appraisal sector commented, "Even though the publicly announced price has increased compared to when the Bank of Korea last received an appraisal, market value is crucial for buildings, so the appraisal amount could decrease further."