Yojin Construction Industry·K-Clavis Management Consortium
Refinancing Loans Borrowed for Hotel Acquisition and Remodeling
Hotel Value Rising Due to Yongsan-gu Development Boom
The consortium of Yojin Construction Industry and K-Clavis Asset Management refinanced the loan they borrowed when acquiring the Mondrian Hotel in Itaewon, Seoul (formerly the Capital Hotel) by increasing the loan amount. This was to repay the debt incurred during the acquisition and remodeling of the Capital Hotel and to secure additional operating funds. Thanks to the rise in surrounding land prices and improved hotel performance, the hotel's value is assessed to be steadily increasing every year.
According to the investment banking (IB) industry on the 10th, Hotel Capital Co., Ltd. raised approximately 235 billion KRW from a lending group composed of financial companies and regional credit unions. In this process, the Mondrian Hotel building and land were provided as collateral. The loan was executed in two tiers according to repayment and collateral enforcement priority: senior loan of 180 billion KRW and subordinated loan of 55 billion KRW. Investors included financial institutions such as the National Credit Union Federation of Korea and other regional credit unions, Hanwha Investment & Securities, Shin Young Securities, capital companies, and savings banks. It is known that most of the lending group, which previously provided a 210 billion KRW asset-backed loan (ABL), reinvested in this refinancing.
Hotel Capital is a corporation established by the consortium of Yojin Construction Industry and K-Clavis to acquire the former Capital Hotel. The major shareholder is ‘(Ltd.) Itaewon Global Landmark Development,’ and it is understood that the consortium companies hold shares in Hotel Capital divided among themselves. The consortium acquired the former Capital Hotel in 2018 for about 140 billion KRW. At the time of acquisition, they planned to increase the floor area ratio of the Capital Hotel for reconstruction. However, since the approved floor area ratio fell short of initial expectations, the strategy was revised to remodeling. After about two years of remodeling construction, the hotel reopened under its current name in 2020. Over 200 billion KRW was borrowed during the acquisition and remodeling process.
The performance has been steadily improving. In 2020, the first year of reopening, sales were only 4.2 billion KRW due to a limited number of operating days and the impact of COVID-19. In the following year, 2021, sales rose to 15 billion KRW, and after the endemic phase of the pandemic, business improved, increasing sales to 28.6 billion KRW last year. Operating losses exceeded 10 billion KRW for two years in 2021 and 2022 due to depreciation expenses from remodeling, but last year, four years after reopening, the hotel turned a profit with an operating income of 2.1 billion KRW.
Yongsan-gu, where the hotel is located, is filled with major real estate developments such as the Yongsan International Business District, Hannam New Town development, UN Command site development, and Yongsan National Park project. As these projects have gradually materialized, land prices have risen significantly, and the real estate value of the Mondrian Hotel has also increased. Notably, the Mondrian Hotel is located directly across the road from the planned site of Yongsan National Park and is adjacent to the UN Command site development project led by Eleven Construction.
Like the Capital Hotel, the Itaewon Crown Hotel, another representative hotel in the area, is also undergoing development. A consortium consisting of Hyundai Construction, Hana Alternative Asset Management, RBDK, and Korea Investment Real Estate Trust acquired the Crown Hotel in 2021 for 250 billion KRW and is developing a residential mixed-use building by increasing the floor area ratio. Hyundai Construction began construction last year, with completion planned for 2026.
An IB industry official said, "Major domestic investors are purchasing old hotels in Gangnam-gu and Yongsan-gu, Seoul, and increasing their value through redevelopment," adding, "The Mondrian Hotel, which is adjacent to large-scale development projects around Yongsan-gu, was able to refinance a loan larger than the existing debt due to the rise in land and building prices."
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