Notification of Decision to Cancel Preferred Negotiation Candidate Selection and Terminate Business Agreement Due to Private Operator's Failure to Fulfill Obligations and Inability to Verify Business Capability
Park Hong-ryul, Mayor of Mokpo City, held a press conference on the morning of the 29th regarding the cancellation of the priority negotiation candidate for the private developer selected in January 2022 for the construction of Samhakdo Hotel and the decision to terminate the business agreement.
The city has been promoting the "Mokpo Samhakdo Peace Nuri Amusement Park Development" as a private investment project to attract a 5-star hotel and a convention center with over 800 seats within Samhakdo.
In May 2021, the city invited bids for a private developer and in January 2022 selected Sky One Leisure Co., Ltd. as the priority negotiation candidate for the Samhakdo Peace Nuri Amusement Park development. In April 2022, the city signed an agreement with Daeyoung DLMPFV Co., Ltd., a special purpose corporation established by Sky One Leisure Co., Ltd. and five consortium partners.
Subsequently, in February 2023, upon submission of materials related to the hotel establishment by the private developer, Mokpo City proceeded with the procedures for drafting amendments to the basic urban plan and urban management plan. During consultations with relevant departments, it was highlighted that the project site is located in a disaster-vulnerable area. Accordingly, the city requested the private developer to supplement the plan by establishing a disaster prevention (facility) plan and submitting a strategic environmental impact assessment report.
Mokpo Mayor Park Hong-ryul is holding a press conference regarding the termination of the agreement with the private business operator related to the Samhakdo Hotel. [Photo by Mokpo City]
However, no supplementary documents were submitted by the notification date of the termination of the business agreement on the 9th, and subsequent administrative procedures did not proceed.
Additionally, in June of last year, the private developer requested a change to the real estate income rights certificate submitted as a performance bond for the agreement. Upon reviewing the related documents, the city found issues in both the originally submitted documents and the requested changes, and immediately rejected the requested changes to the real estate income rights certificate.
According to the agreement with Mokpo City, the private developer was required to pay 5% of the proposed project cost of 350 billion KRW, amounting to 17.5 billion KRW, as a performance bond, which was submitted in the form of a real estate income rights certificate.
However, after consultation with experts including lawyers and certified public accountants, the city evaluated the asset value of the originally submitted real estate income rights certificate at approximately 6.9 billion KRW, which was 10.6 billion KRW less than the required 17.5 billion KRW performance bond.
Furthermore, among the 157 collateral items in the real estate income rights certificate requested for change by the private developer, 154 were second-priority collateral without secured preferential repayment rights.
Thereafter, the city requested the private developer seven times to provide alternative payment methods for the original real estate income rights certificate, but the private developer did not respond appropriately.
The performance bond is a minimum safeguard to resolve issues such as business suspension or bankruptcy of the private developer, and serves as the minimum evidence to verify the developer’s willingness and capability to carry out the project, including capital procurement. The city requested alternative payment methods from the private developer in accordance with the agreement for public interest purposes.
Mokpo City requested supporting documents such as financial agreements from financial investors to objectively verify the private developer’s ability to perform the project, and investment decision documents from participating hotels for attracting a 5-star hotel, but the private developer has yet to submit any materials.
Due to the lack of appropriate response to these requests, the city conducted in-depth internal reviews, deliberations, and hearings under the Administrative Procedures Act, confirming that the private developer’s failure to submit alternative payment methods for the performance bond and requested documents constitutes a breach of obligations under the bidding guidelines and business agreement.
Based on these breaches, the city made the final decision that the private developer lacks the capability to perform the project, canceled the selection of the priority negotiation candidate, and confirmed the termination of the business agreement, notifying the private developer of the termination on the 9th.
Mayor Park Hong-ryul stated, “Going forward, we will review plans to develop Samhakdo into an ecological theme park visited by both citizens and tourists. We will gather public opinion from all sectors and communicate with the city council, media, and civic groups to explore a future vision for the development of Samhakdo in the public interest.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
