Decline in Apartment Complex Shops' Popularity Due to COVID-19 and Recession
Association's Efforts to Settle Payments and Resolve Lawsuits
[Asia Economy Reporter Noh Kyung-jo] It has been confirmed that Helio City in Garak-dong, Songpa-gu, Seoul (reconstruction of Garak Siyoung Apartment), which was completed over four years ago, has not yet been able to dissolve its association. This is because the owners of four commercial units within the complex have not been found. Since 2020, the reserved commercial units for sale have lowered the minimum bid price by more than 1 billion KRW at most, but due to the prolonged COVID-19 pandemic and deepening economic recession, the units have repeatedly failed to sell.
According to Seoul City’s Comprehensive Maintenance Project Information on the 8th, the Garak Siyoung Reconstruction Association posted a bidding announcement yesterday for the remaining four reserved commercial units. This is already the third announcement this year. Among the five units offered on the 4th of last month, only unit 132 in the basement level 1 was sold, while the remaining four units have been repeatedly passed over for a long time due to high prices and other reasons.
Reserved units refer to quantities that the reconstruction or redevelopment association, as the project implementer, keeps in reserve without general sale to prepare for possible omissions or errors in members’ shares and future lawsuits.
The reserved apartment units in Helio City were sold off long ago. The problem lies with the reserved commercial units. The commercial spaces within the complex have been popular due to the advantage of securing fixed demand from apartment residents, which quickly activated the commercial district. However, due to the impact of COVID-19 dampening consumer sentiment and the sharp rise in interest rates since last year, investor interest has generally declined.
Nevertheless, the association has not easily lowered the bidding base prices. For example, the base price for unit 59 on the first floor was adjusted downward from 1.6 billion KRW to 1.552 billion KRW after about two years and six months. The price initially set three years ago was 2.6 billion KRW, but after three failed bids, it dropped to 1.6 billion KRW in August of that year. Although it failed several more times afterward, there was no price change until last month. Unit 113 on the first floor also dropped from 680 million KRW to 500 million KRW in the first year of bidding and has remained the same since.
The construction industry believes that the association is unlikely to significantly lower the minimum bid price because there are still payments to be made and settled with the construction consortium (Hyundai Engineering & Construction, HDC Hyundai Development Company, Samsung C&T) and the commercial association. A representative from Hyundai Development Company said, "The amount to be received from the association is in the hundreds of millions of KRW, and we are coordinating smoothly with the association."
The association is also seeking ways to promptly proceed with dissolution and liquidation. In this regard, it was reported that they are considering transferring reserved commercial units equivalent to the amount payable to the commercial association. An association official said, "We might give commercial units instead of money that we have to pay anyway," adding, "However, since there are several lawsuits filed, it will take quite some time before the association is dissolved."
Meanwhile, Helio City consists of 9,510 households and was completed at the end of 2018. Before Olympic Park Foreon (reconstruction of Dunchon Jugong Apartment), it was known as the 'largest reconstruction since the founding of Korea.' Move-in was completed in April 2019.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
