Participation of Securities Firms Including Samsung, Meritz, and Kyobo
POSCO E&C as Construction and Responsible Completion
Business Feasibility Rises with GTX-B Line Groundbreaking
A project financing (PF) fund of 716 billion KRW has been secured for the construction of the large-scale apartment complex ‘Songdo The Sharp G5 Block’ in Songdo, Incheon. Recently, as financing for prime PF projects has been steadily secured, it is expected that the development projects in Songdo with strong business potential will gain renewed momentum.
According to the investment banking (IB) industry on the 22nd, Songdo International City Development Co., Ltd. received a project financing (PF) loan of 716 billion KRW from Samsung Securities, Meritz Securities, Kyobo Securities, and others. The investment was raised by dividing the loan into senior tranche of 586 billion KRW and subordinated tranche of 130 billion KRW according to repayment priority. Several financial companies, including securities firms, participated as a lending consortium providing loans to the project company.
Songdo International City Development will use the procured funds for the development of Songdo G5 Block. The project involves constructing and selling a large-scale residential complex with 1,544 apartment units, 96 officetel units, and neighborhood living facilities on G5 Block, lot 32-1, Songdo-dong, Yeonsu-gu, Incheon. The complex consists of a total of 15 buildings ranging from 2 basement floors to a maximum height of 46 floors.
The construction company, POSCO E&C, agreed to obtain completion and occupancy approval within 58 months after loan disbursement. They signed a completion guarantee agreement with the lending consortium, which stipulates that if the completion obligation is not fulfilled, they will bear responsibility for repaying the PF loan. This safety measure was established to hedge the risk from the lenders’ perspective that the construction company might fail to complete the project or obtain permits, resulting in default on principal and interest repayment.
The securities firms provided credit facilities such as capital replenishment commitments while selling part of the loan as securitized bonds in the secondary market. If funds required for repayment of the securitized bonds fall short due to poor pre-sale rates, they agreed to support the shortfall. In effect, they provided a form of guarantee on the principal and interest of the PF securitized bonds.
The financial companies participating as the lending consortium executed the loan, recognizing the high business viability of the project. Songdo The Sharp G5 Block is a key project site located adjacent to the Landmark City Lakeside Park, which is planned to be developed along with a park, offering lake views. The site covers a total area of 295,406 square meters, part of which will be developed into a park.
It is also evaluated to have excellent living infrastructure, with large supermarkets and complex commercial facilities located nearby. According to industry sources, Costco Songdo branch is about a 2-minute walk (550 meters) from the complex, Lotte Mart Songdo branch is about 5 minutes away (1.5 km), and Homeplus Incheon Songdo branch and Hyundai Premium Outlet Songdo branch are both about a 10-minute walk (2.9 km). For medical facilities, the comprehensive hospital Nazareth International Hospital is located about 15 minutes away (4.3 km).
An IB industry official said, "Songdo has established or is currently developing projects such as the international business district combining office, residential, and commercial facilities, the international passenger terminal, knowledge information industry complex, bio complex, and advanced industrial cluster," adding, "With the opening of the GTX-A line and the commencement of construction of the GTX-B line starting from Songdo, the business viability of residential projects in Songdo is increasing."
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