Hanwha Investment Leads 334 Billion KRW Project Financing... Hyundai Construction Provides Joint Guarantee
Largest Redevelopment Project in Gangbuk Area Resumes After Construction Halt
Successful Fundraising for Development Projects in Seoul and Gyeonggi Areas Continues
The 334 billion KRW project financing (PF) fund procurement (refinancing) for the Daejo 1 District redevelopment project in Eunpyeong-gu, the largest redevelopment project in the northern Seoul area, has been successfully completed. With Hyundai Engineering & Construction, the contractor, providing joint guarantees, the construction, which had been halted due to disputes, is set to resume in earnest.
According to the investment banking (IB) industry on the 9th, the Daejo 1 District redevelopment association secured a PF loan of up to 334 billion KRW, with Korea Investment & Securities as the lead manager. Investors were recruited by dividing the loan into a senior tranche of 200 billion KRW and a subordinated tranche of 134 billion KRW based on collateral and repayment priority. Hyundai Engineering & Construction, the contractor, provided joint guarantees for the PF loan. The procured funds are planned to be used for repaying existing borrowings and project expenses.
The Daejo 1 District redevelopment is attracting attention as the largest redevelopment project in northern Seoul. It involves redeveloping an 112,000㎡ (33,940 pyeong) site in Daejo-dong 88 and 89, Eunpyeong-gu, Seoul, to build a massive residential complex consisting of 28 buildings with 2,451 households, ranging from four basement floors to 25 above-ground floors. Hyundai Engineering & Construction began construction in October 2022 and is aiming for completion in October next year.
The Daejo 1 District redevelopment project faced difficulties as construction was suspended for half a year from early this year due to disputes over construction costs. Approximately 180 billion KRW in construction fees remained unpaid until the end of last year after the groundbreaking, leading to a complete halt in construction from early this year. The redevelopment association experienced internal conflicts that led to organizational collapse, resulting in over a year without an executive body, which further intensified the confusion.
Earlier this year, the conflict escalated to lawsuits involving the executive body, prompting the Seoul city coordinator's dispatch and mediation and meetings by the Housing Policy Director and the Mayor of Eunpyeong-gu. The contractor stated that construction would only resume once a stable executive body was established. Subsequently, a new executive body was appointed last month, and the project resumed.
On the same day, Korea Investment & Securities also led the PF fund procurement of 104 billion KRW for the development project of the ‘K-Square Grand Knowledge Industry Center’ in Gayang-dong, Gangseo-gu. This project involves constructing two knowledge industry center buildings, ranging from five basement floors to 21 above-ground floors, on a 22,871㎡ (6,930 pyeong) site near Jeungmi Station on Subway Line 9 at 449-19 Gayang-dong. Hyundai Engineering & Construction, the contractor, also provided joint guarantees for this loan.
An IB industry official said, "The PF fund procurement for Daejo 1 District and Gayang Knowledge Industry Center proceeded smoothly as Hyundai Engineering & Construction, a top-tier construction company, provided joint guarantees and completion responsibility," adding, "As the profitability of development projects in the Seoul and Gyeonggi areas has recently improved, PF fund procurement for projects with high pre-sale and occupancy rates is being actively carried out."
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