Seoul City to Hold Integrated Review of Harim Yangjae-dong Site on 26th
High Potential for Yangjae-dong Site Development Seen as Positive
Harim Denies Securing Funds Using Yangjae Logistics Complex
A green light has been given to the development project of the Yangjae Urban High-Tech Logistics Complex, a long-cherished project of Harim Group. According to Seoul City, it has been confirmed that the integrated review for the site, for which Harim applied for development, is likely to pass on the 26th. If this review passes, it is expected to ease the 'winner's curse' risk emerging in the HMM acquisition process, as the site value will increase, making it easier to secure funds.
According to Seoul City on the 22nd, the Logistics Complex Planning Integrated Review Committee will conduct the main review of Harim Group's project plan for the 'Urban High-Tech Logistics Complex Pilot Site' at 225 Yangjae-dong, Seocho-gu, Seoul, on the 26th. If the committee approves the plan that day, Harim Group will take the first step toward building a complex logistics complex worth 6.4 trillion KRW.
According to multiple sources, the integrated review for the site is highly likely to pass that day. A Seoul City official said, “The Yangjae Urban High-Tech Logistics Complex development project recently passed the strategic environmental impact assessment, and legal-related matters have been somewhat coordinated in advance. If any conditions are attached or significant defects are found, they can be supplemented, so the possibility of approval not being granted is low.” After passing the review, the process will move to the building permit stage, where Seocho District Office will decide on the approval of the housing construction project.
This project is a kind of smart city project where logistics, office, cultural, educational research facilities, apartments, officetels, and other residential and lodging facilities are complexly built. Harim Group purchased the site in 2016 for 452.5 billion KRW. The project site is located southwest of the Yangjae IC intersection and is close to Gyeonggi Pangyo Techno Valley, Hyundai Motor Group Global Management Research Institute, Hyundai-Kia Motor headquarters building, LG Electronics Seocho R&D Campus, grain distribution center and wholesale market, and flower wholesale market. It is considered a prime location preferred by companies, research institutes, and distribution businesses.
Some expect that if this review passes, the increase in site value will alleviate concerns about Harim Group’s fund-raising for the HMM acquisition. Some experts estimate that the site value could rise to several trillion KRW upon passing the review. A real estate industry official said, “Once permits are finalized, stable collateral loans from banks will be possible, and various structured finance forms can be utilized in capital raising processes such as paid-in capital increases or acquisition financing.”
Since residential and various commercial facilities will be built, maximizing profitability through increased floor area ratio (FAR) is also expected. However, it has not yet been decided how much Seoul City will allow the FAR through this review.
When Harim purchased the land in 2016, the district unit plan limited the building FAR to 400% or less, making ultra-high-rise and high-density development difficult. However, after Oh Se-hoon was elected mayor of Seoul, this site was designated as a ‘Urban High-Tech Logistics Complex Pilot Project Site’ by the Ministry of Land, Infrastructure and Transport, and the city is promoting development based on the Logistics Facilities Act. Applying this law means that 30% logistics facilities and 20% upstream facilities must be mandatorily constructed, but the statutory maximum FAR of 800% can be applied. Therefore, it is expected that the complex development applying the ‘FAR 800%’ claimed by Harim can be realized through this review.
However, Harim Group has drawn a line regarding fund-raising using the Yangjae Urban High-Tech Logistics Complex. They emphasize that the Yangjae Urban High-Tech Logistics Complex development project and the HMM acquisition should be regarded as entirely separate matters. A Harim Group official said, “The two projects should be viewed separately. The Yangjae Urban High-Tech Logistics Complex development project is currently in the stage of negotiating to obtain permits from Seoul City,” adding, “Liquidity is being secured smoothly.”
Meanwhile, on the 19th, Harim Group, ranked 27th in the business world with 17 trillion KRW, was selected as the preferred negotiation partner for acquiring HMM, ranked 19th with 25.8 trillion KRW. Harim Group proposed an acquisition price of 6.42 trillion KRW and plans to raise acquisition funds through paid-in capital increases by Pan Ocean, the acquisition entity. However, despite gaining an advantage in the acquisition competition, concerns are growing over the ‘winner’s curse’ risk due to the excessive acquisition price.
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