SK Ecoplant Joint Guarantee, Kiwoom Securities Lead
High Feasibility Prime Project, Smooth Liquidity Secured
Despite ongoing concerns about the insolvency of real estate project financing (PF) by financial companies, PF funding for high-quality housing projects is being successfully secured one after another. Recently, following the completion of several trillion won in main PF funding by the developer of ‘Yongin Eunhwa-sam Prugio’ constructed by Daewoo E&C, a redevelopment association in Gwonseon-gu, Suwon, which achieved a 100% pre-sale rate, also succeeded in obtaining project financing loans.
According to the investment banking (IB) industry on the 12th, the ‘Gwonseon 113-6 District Housing Redevelopment Maintenance Project Association’ completed raising 150 billion won in project financing with Kiwoom Securities as the lead manager. The loan maturity is 2 years and 6 months, with a lump-sum principal repayment at maturity. The association is promoting a housing redevelopment project in Seryu-dong 817-72, Gwonseon-gu, Suwon-si, Gyeonggi Province. The plan is to build an apartment complex called ‘Maegyo Station Pallucid’ consisting of 32 buildings ranging from 2 basement floors to a maximum of 15 floors above ground, totaling 2,178 households.
The raised funds are reportedly planned to be used to support relocation costs for residents within the project site. The association intends to initially withdraw 100 billion won out of the total 150 billion won loan amount and use it, with the remaining 50 billion won to be used additionally as needed. SK Ecoplant, a reputable construction company affiliated with the SK Group, provided joint guarantees for this project financing loan.
Kiwoom Securities issued asset-backed securities based on this project financing loan as the underlying asset (a type of collateral). In this process, they provided a capital replenishment agreement to the asset-backed securities investors. If problems arise in the project making it difficult to repay the principal and interest of the asset-backed securities, they promised to support the SPC with the necessary funds for repayment. From Kiwoom Securities’ perspective, this effectively increased their contingent liabilities related to PF.
The success in raising project financing funds amid financial companies’ hesitation to deploy new funds in the PF market is attributed to the high profitability of the redevelopment project. The Maegyo Station area in Suwon, where the project is located, has seen active urban redevelopment projects on a new town scale in recent years, following Gwanggyo and Dongtan new towns. It is transforming into an emerging residential town in Suwon, supplying approximately 12,000 new households.
Among them, Gwonseon 113-6 District proved its high profitability by achieving a 100% sell-out in the recent pre-sale. The participation of top-tier domestic construction companies with strong brand recognition, including Samsung C&T, ranked number one in construction capability, SK Ecoplant, and Kolon Global as contractors, also enhances the project’s viability.
The transportation accessibility is also evaluated as excellent. The project site is located near Maegyo Station on the Suin-Bundang Line, and Suwon Station, where the Suin-Bundang Line and KTX Gyeongbu Line stop, is just one station away. Suwon Station has recently been confirmed as a stop on the GTX-C line, which has just started construction, and there are recent reports of additional development of the F line.
Proximity to Suwon City Hall, Suwoncheon Stream, Olympic Park, and Samsung Electronics Suwon Plant also contributes to the excellent living environment. Along with AK Plaza and Lotte Mall around Suwon Station, the opening of Starfield near Hwaseo Station is continuously improving living conditions.
An IB industry official said, "PF loans for local projects that have not yet started construction or projects with low pre-sale rates remain difficult, but high-quality PF projects with high pre-sale rates or expected good profitability are securing funding one after another," adding, "The PF market is also showing signs of deepening polarization depending on project profitability."
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