SH Corporation "Promoting Direct Construction, Sale, and Leasing Instead of Bulk Sale of Development Projects"

Southeast Distribution Complex, Total Project Profit Reaches 2.4 Trillion Won Including Asset Value
New Projects Such as Yongsan International Business District and Great Hangang
"Promoting Direct Construction, Sale, or Lease Instead of Bulk Sale or Disposal"

Seoul Housing and Communities Corporation (SH Corporation) plans to develop the Yongsan International Business District and other projects by directly constructing and holding assets instead of selling the entire project site at once. Although the Southeast Distribution Complex project is recording a negative cash flow, SH Corporation argues that the business model of direct construction and asset holding can lead to increased cash flow compared to bulk sales.

At a press briefing, SH Corporation announced on the 14th that "as of the end of last year, the Southeast Distribution Complex project recorded a deficit of 101.6 billion KRW due to land lease of the complex logistics complex and rental of Garden Five commercial spaces." Expenditures including land costs, construction costs, and selling and administrative expenses (2.2765 trillion KRW) exceeded income from land sales, commercial space sales, and rental deposits (2.1749 trillion KRW). However, when adding the asset value of the logistics complex and 2,852 Garden Five commercial units currently held, cash flow increases by 2.4721 trillion KRW, resulting in a total project surplus of 2.3705 trillion KRW.

The Southeast Distribution Complex refers to the integrated logistics complex, Garden Five, and revitalization zone located in Munjeong-dong 634 area, Songpa-gu, completed in 2014. SH Corporation developed the integrated logistics complex and leased it to Seoul Integrated Logistics PFV, which operates it as a logistics terminal and delivery center. For Garden Five, SH Corporation directly constructed 8,370 commercial units and currently holds and leases 2,852 units (34%). The remainder were sold. The revitalization zone land was sold to the private sector.

SH Corporation analyzed how cash flow would change if the business model shifted to direct operation excluding general sales. The project surplus, calculated by subtracting expenditures from income, is -1.8532 trillion KRW, but when reflecting asset value (5.3775 trillion KRW), the project surplus is estimated at 3.5243 trillion KRW. By project, assuming 100% direct operation of the logistics complex, the project surplus is 1.7431 trillion KRW. Garden Five is estimated at 547.3 billion KRW, and the revitalization zone at 912 billion KRW.

Based on this business analysis, SH Corporation announced that it will move away from the business model of bulk sales or disposal when promoting new projects such as the Yongsan International Business District or Great Hangang. Instead, considering liquidity and asset value, it will proceed with direct construction, sale, or leasing methods. Kim Heon-dong, President of SH Corporation, said, "Like the Southeast Distribution Complex case, we will promote projects by combining various methods such as direct construction, sale, and asset holding (leasing), considering liquidity and asset value increases."