Prima Hotel Site 'Le Pied Cheongdam' Project
Priority Shareholder Saemaeul Geumgo Central Association Changes Position
Bridge Loan Extended for 1 Year
The bridge loan for 'Le Pied Cheongdam,' which was facing a loss of benefit of term (EOD) crisis, has been tentatively extended. Concerns over a domino effect of real estate project financing (PF) defaults have been temporarily eased.
According to financial sources on the 29th, the PF lenders' council is scheduled to resolve this matter on the 5th of next month, following the lead investor, Saemaeul Geumgo Central Association, shifting its stance to extend the maturity. The provisional extension period is set until May next year. The developer has agreed to obtain Seoul city permits within this timeframe.
The 'Le Pied Cheongdam' project aims to develop luxury officetels on the site of the Prima Hotel in Cheongdam-dong, Gangnam-gu, Seoul. However, contrary to the 'Cheongdam invincibility myth,' the real estate market downturn led the lead investor, Saemaeul Geumgo Central Association, to oppose the loan maturity extension due to concerns over the project's viability, escalating the crisis. Saemaeul Geumgo provided approximately KRW 180 billion, about 39% of the total KRW 464 billion bridge loan for 'Le Pied Cheongdam,' as senior debt.
As the prime land development project in Gangnam faced the risk of collapse, concerns about a chain reaction of PF loan defaults emerged in the market. The situation faced by the Le Pied Cheongdam project closely resembles the PF loan extension case of 'Dunchon Jugong' at the end of last year. If the bridge loan extension for this Cheongdam-dong project had been rejected, it was highly likely to trigger a domino effect across other PF projects, ultimately leading to overall funding pressure in the PF market.
However, with the maturity extension now agreed upon, there is some relief. Le Pied Cheongdam was selected in August for Seoul's urban, architectural, creative, and innovative design pilot project, and the developer improved the project's viability by increasing the building height from the originally planned 25 floors to about 50 floors, including constructing a penthouse with a Han River view on the top floor. These factors reportedly played a positive role. Additionally, various considerations, such as the negative image Saemaeul Geumgo would face if the extension were rejected, were also taken into account.
Although the Saemaeul Geumgo Central Association's change of stance has temporarily eased the situation, tensions cannot be relaxed yet. There is still a long way to go from permits to conversion to main PF and sales. Financial authorities are closely monitoring the situation. A financial regulator commented, "While time has been bought for now, the fundamental problem has not been resolved."
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