[Reporter’s Notebook] The 'Small Greed' of GIST That Sank the Banpo Project Site

"It was a judgment on whether it is more profitable to continue by making an additional withdrawal (putting in more money) or to stop (halt the business and sell it)."

This was the response when asking a representative of the Korea Technology Finance Corporation (KOTEC) why the Banpo-dong project, constructed by Taeyoung Construction, is going up for public auction. This project, which involves building a 20-story residential facility on a prime site, could not secure the promised funds as Taeyoung Construction entered workout (corporate financial restructuring). At the crossroads of either injecting additional funds or ending the project, KOTEC ultimately decided to stop the project and sell the site.

On the 11th, the fate of Taeyoung Construction, which applied for a workout (corporate restructuring) after failing to repay real estate project financing (PF) loans worth about 9 trillion won, is being decided, creating tension at Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@

KOTEC can control the disposition of Taeyoung Construction’s project site because it is the senior creditor who invested the most funds in this project. It committed 152 billion KRW as senior debt and actually invested 93.6 billion KRW. If the main lender, KOTEC, decides to recover the loan, there is no way to stop it.

However, questions remain about KOTEC’s decision. Due to the real estate market downturn, the possibility of recovering the entire principal through a public auction is low. Construction has already progressed about 30%, which reduces the attractiveness of the bid. Even if someone wins the bid for the site, additional costs will be incurred for redevelopment, and if there are no buyers and the auction fails repeatedly, the price will drop further, reducing the amount recoverable.

Although it is a long-term battle, injecting funds to complete the project and recovering the investment through sales could be a more certain profit-generating strategy. Since this is a prime Banpo project, once completed, the investment can be recovered through building sales or collateral loans.

Of course, since KOTEC is a government-affiliated organization operated with members’ funds, its decisions may be conservative. It is also cautious about injecting additional funds or having other creditors inject funds that would push down its debt ranking. However, how can it explain to the scientists and engineers the justification for a decision that is clearly a loss?

In the end, it seems KOTEC’s concern was not the normalization of the project. Even after Taeyoung Construction’s workout at the end of last year, there was no consultation with the developer or the constructor. The only action was sending a letter on the 7th demanding loan recovery. A KOTEC official stated that ‘sufficient time was given,’ implying there was enough time to purchase KOTEC’s debt.

The project site has been halted for over two months since March 4. The ground has been excavated more than 10 meters deep, and the project stopped. Although retaining facilities have been installed, continuous summer monsoon rains pose a risk of subsidence, leaving the site exposed to danger. KOTEC, which effectively holds decision-making power, must quickly resolve the situation. There is not enough time to change the decision.