Hyundai Construction Joint Guarantee... Participation by Commercial Banks and KB Securities
Construction of Large-Scale Luxury Residential Complex with 197 Buildings, 22 Floors High
A financial company loan worth 2.5 trillion KRW for the ‘Hannam 3 District Redevelopment Project’ was secured with a guarantee from Hyundai Construction. The funds raised by the redevelopment association will be used to support relocation expenses. As residents begin to relocate, the redevelopment project of a luxury housing complex on the scale of Seoul’s largest-ever new town has officially commenced.
According to the investment banking (IB) industry on the 16th, the Hannam 3 District Redevelopment Association (Hannam 3 Redevelopment Promotion District Housing Redevelopment Association) raised 400 billion KRW in funds on the same day, with KB Securities as the lead manager. A special purpose company (SPC) created by KB Securities issued securitized bonds and lent the funds raised from investors back to the association. Hyundai Construction, the contractor, provided joint guarantees to the SPC, enabling the successful recruitment of investors. KB Securities provided credit facilities in the form of purchase commitments for the securitized loan bonds.
The association previously received relocation loans totaling 2.1 trillion KRW from a consortium of four major commercial banks. Both the bank loans and the securitized loans reflected Hyundai Construction’s credit rating, resulting in an interest rate in the low 6% range. The loan maturity is five years, with principal and interest scheduled to be fully repaid by November 2028, when the project is planned to be completed.
The funds raised will be used to support relocation expenses in Hannam 3 District. A total of approximately 8,300 households must relocate over two years until construction begins in 2025. Among those scheduled to relocate, tenants account for about 6,300 households, representing more than two-thirds.
Once relocation is complete, Hyundai Construction plans to start construction in 2025 and complete the redevelopment project by 2028 after a three-year construction period. Before construction begins, the association is expected to pursue additional project financing (PF) worth several trillion KRW to secure construction costs.
With the completion of relocation funding and the start of resident relocation, the Hannam 3 District redevelopment project has entered its main phase. The association plans to build 197 buildings with heights ranging from six basement levels to 22 floors above ground, totaling 5,816 apartment units on the site at 686 Hannam-dong, Yongsan-gu, Seoul. The area includes a mix of Type 1 to Type 3 general residential zones and semi-residential zones, with a building coverage ratio of 42.09% and a floor area ratio of 232.47% applied.
Additionally, infrastructure will be developed including 51,849.3 square meters of roads, 27,263.6 square meters of parks, 1,410.0 square meters of public offices, 1,298.2 square meters of social welfare facilities, 10,755.4 square meters of schools, and 4,044.1 square meters of parking lots. The total project site area is 386,395.5 square meters, with a total new floor area reaching 1,048,998.52 square meters.
Hannam 3 District was designated as a redevelopment promotion district by Seoul City in October 2009. After the association was established in September 2012, the project implementation plan was approved in March of the same year. The association selected Hyundai Construction as the final contractor in June 2020, established the management disposition plan in July last year, and submitted the approval application in August. Yongsan-gu approved the management disposition plan submitted by the association in June after feasibility verification by the Korea Real Estate Board.
A financial company official stated, "The Hannam 3 District redevelopment project is the largest redevelopment project since the founding of Korea, with trillions of won expected to be invested solely in relocation expenses. With the participation of various financial companies including banks and securities firms, the funding for relocation expenses has been completed, and the project is expected to proceed in earnest."
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