Buyers "Will the court-managed Shindong-A Construction apartments be okay?"... 7 complexes with sales guarantees

Announcement of Winners for Geomdan New Town Familier Elif on the 8th
Shindonga 80% Participation, Gyeryong Construction Industry Stake May Increase
Shindonga Construction 20% Participation in Godeok Miraedo Familier
The Remaining 5 Sites Are Simple Contracted Construction with Minimal Impact

Mid-sized construction company Shindongah Construction has filed for corporate rehabilitation proceedings (court receivership), deepening concerns among apartment buyers who participated in the development and construction of projects. Projects such as ‘Geomdan New Town Familier Elif,’ which are about to enter contract signing, face uncertainties about whether the projects will proceed smoothly. The court receivership of Shindongah Construction and the sales guarantee incidents are separate matters. Since Shindongah Construction is only responsible for apartment construction in subcontracted projects, it is expected that the impact will not be significant.

According to Cheongyak Home and others on the 7th, among the complexes where Shindongah Construction participated in construction, Geomdan New Town Familier Elif (AA32 Block) is scheduled to announce winners on the 8th. This complex is jointly constructed by Shindongah Construction (80%) and Gyeryong Construction Industry (20%). Recently, the subscription results showed an undersubscription with only 313 applications for 618 units.

Although the complex has a sales guarantee from the Housing and Urban Guarantee Corporation (HUG), there is a possibility that successful applicants may forgo contracts due to Shindongah Construction’s court receivership filing. An industry insider explained, "Contractors who heard about the receivership may withdraw, and it may be difficult to reach a conclusion until the decision on the commencement of receivership is made."

A sales representative for Geomdan Familier Elif stated, "Since project financing (PF) has already been arranged, it will be difficult to halt the project now, and there is a possibility that Gyeryong Construction Industry’s stake will increase."

Gyeryong Construction Industry, Shindongah Construction, and HUG will hold related consultations soon. A representative from Gyeryong Construction Industry said, "We need to proceed with discussions to know for sure, but nothing has been decided yet, including whether we will bear the 80% joint subcontracting share."

For ‘Godeok International New Town A50 Block Miraedo Familier,’ the official contracts will be signed from the 6th to the 8th. The main contractor for this complex is Moa Construction, and Shindongah Construction’s participation rate is 20%. The industry expects no issues in project progress due to Shindongah Construction’s relatively low stake. This complex received applications last month, with 1,274 applications for 325 units.

According to HUG, there are currently seven complexes where Shindongah Construction is involved in development and construction, including the two complexes mentioned. The total sales guarantee amount reaches 1.1 trillion KRW. Among the seven complexes, Godeok Miraedo Familier and Geomdan New Town Familier Elif are joint development and construction projects. The remaining five complexes are projects where Shindongah Construction is only performing subcontracted construction work. These include Dongtan Eoullim Familier, e-Pyeonhansesang City Wondang, Dongtan Summa Desiang, Uijeongbu Station Shindongah Familier, and Uijeongbu Station Familier II.

An HUG official said, "None of the seven projects currently have sales guarantee incidents." This means that Shindongah Construction entering court receivership is different from construction halting or sales guarantee incidents occurring. In particular, "Subcontracted projects are not subject to sales guarantees issued to Shindongah Construction, so they are unrelated," the official explained.

The conditions for a guarantee incident include cases where the primary debtor defaults, goes bankrupt, or abandons the project; construction is halted for more than three months due to the primary debtor’s default or bankruptcy; or the project is delayed by more than six months beyond the scheduled timeline without justifiable reasons when the construction progress exceeds 75%. If a guarantee incident occurs, HUG handles the matter through either refund execution or sales execution. An HUG official stated, "We will explore various measures to normalize the projects with issued sales guarantees."

Shindongah Construction submitted a petition for commencement of corporate rehabilitation proceedings to the Seoul Bankruptcy Court Rehabilitation Division 3 (Presiding Judge Lee Yeo-jin) on the 6th. The decision on whether to commence is expected within this month. As of the end of 2023, Shindongah Construction’s debt ratio was 428.75%. Due to liquidity deterioration, it failed to cover a 6 billion KRW promissory note maturing at the end of last month, prompting the rehabilitation filing. Established in 1977, Shindongah Construction is a mid-sized construction company known for its housing brand ‘Familier.’ It ranked 58th in last year’s construction capability evaluation.