Purchase of 2 Trillion Won, Purchase Commitment of 1 Trillion Won
Transaction Funds Can Only Be Used for Debt Repayment
The Korea Land and Housing Corporation (LH) Seoul Regional Headquarters in Gangnam-gu, Seoul. [Photo by Yonhap News]
Korea Land and Housing Corporation (LH) will begin the second purchase of land owned by the construction industry, worth 3 trillion KRW, starting from the 30th.
This is a follow-up measure to the "Construction Market Recovery Support Plan" announced by the government last March, aimed at stabilizing the real estate project financing (PF) market and revitalizing the construction industry.
LH conducted the first purchase worth 2 trillion KRW in April, but industry participation was low. This was due to the difficulty of obtaining unanimous consent from all creditors in the real estate PF structure, which consists of multiple financial institutions, for debt repayment. Additionally, expectations regarding the financial authorities' real estate PF normalization measures also played a role.
Accordingly, LH collected opinions from the construction and financial industries over two months starting in June, and actively reflected requests such as extending the submission period and relaxing conditions for permit cancellations to implement the second announcement. Through this, LH will work on normalizing projects by restructuring approximately 21 trillion KRW worth of PF risk exposure (PF loans + land-secured loans + debt guarantee risk exposure) evaluated as "cautionary or at risk," early recovery of loan claims during auction or public sale processes, and conversion to normal claims.
This second purchase totals 3 trillion KRW, including 2 trillion KRW for direct purchase and 1 trillion KRW for purchase commitments. The purchase commitment grants a purchase option for two years starting one year after the commitment date, allowing LH to exercise the purchase option at the price at the time of the commitment.
The purchase targets are lands of 3,300㎡ or more owned by companies that acquired ownership before January 3rd and need liquidity due to debts exceeding the land price.
When companies submit applications, LH will determine purchase eligibility through document review and on-site investigation. The final selection will be made by reverse auction based on the ratio of the desired sale price to the reference price submitted by the companies.
The purchase price is determined by multiplying the reference price by the desired sale price ratio submitted by the company. The entire sale proceeds will be paid solely for debt repayment. LH will provide debt repayment bonds to financial institutions that agreed to the debt repayment. The principal of these bonds will be repaid in a lump sum after a 5-year maturity, and the interest rate will be at the level of the average 5-year maturity government bond yield of the previous month.
Applications can be submitted through the LH electronic procurement system from the 30th until November 1st. After eligibility screening, the final purchase lands will be selected and contracts signed after November. Detailed information can be found on the LH website or in the "Construction Industry Owned Land Purchase Announcement (2nd)" on the LH electronic procurement system.
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