Resident Vote for Complex 7 Ongoing Until the 7th
Strong Preference for Association Method in Complex 7
Complex 5 to Sign Main Trust Contract in First Half of the Year
Complex 1 to Re-select Preliminary Trust Company
Mokdong reconstruction complexes are at a crossroads regarding the method of redevelopment projects. They must choose between entrusting the project to a trust company to speed up the process and reduce the possibility of corruption, or having the association directly implement the project to reduce cost burdens.
Faced with the same dilemma, choices vary by complex. Places like Complex 5, which have agreed to accelerate the project, have designated a preliminary trust company and are preparing for the main contract, while places like Complex 7, which prioritize cost savings, are taking steps to adopt the association method.
Complex 7 Likely to Shift to Association Method
According to the redevelopment industry on the 6th, the Mokdong Complex 7 Reconstruction Promotion Preparation Committee (Preparation Committee) is conducting a vote among owners on the project implementation method until the 7th. Due to growing public opinion favoring the association method, a resident vote is being held. This complex signed a memorandum of understanding (MOU) in October 2023 to designate Koramco Asset Trust as the preliminary trust company. However, opposition to the trust method has increased.
The trust method refers to the reconstruction association delegating project implementation to a trust company. A fee of about 2-4% of the sales revenue must be paid to the trust company, increasing the cost burden on association members. Also, the loan interest rates proposed by trust companies tend to be high, so complexes with good project feasibility prefer the association method. On the other hand, compared to the association method, the trust method has the advantage of less incentive for corruption and easier selection of contractors even for complexes with low project feasibility.
A representative of the Mokdong Complex 7 Preparation Committee explained, "Compared to the association method, the trust method results in significant differences in project costs and relocation loan interest rates, and the amounts to be borne are considerable. The fees payable to the trust company are at least around 60 billion KRW, and the amount due to interest rate differences exceeds the fees." Nearby Complex 6 also decided early on to proceed with the association method and is collecting resident consent forms for establishing the association. The Complex 7 Preparation Committee will finalize the project method once the redevelopment zone designation notice is completed.
Mokdong Complex 7 is currently undergoing public inspection for a redevelopment plan to build up to 49 floors and 4,100 households. It is awaiting opinions from the district council and review by the Seoul City Urban Planning Committee. Complex 7 consists of 34 buildings, 15 floors high, built in 1986, with 2,550 households ranging from 59 to 101 square meters in exclusive area.
Mokdong’s 8 Complexes Opt for Trust Method
Conversely, many associations choose the trust method. Complex 5 selected Hana Asset Trust as the preliminary trust company and will sign the main contract in the first half of this year. When the Complex 5 Preparation Committee surveyed owners about the project method in August 2023, 925 out of 1,065 households (86.8%) who participated in the vote favored the trust method. Although some owners argue for the association method, the preference for the trust method is dominant.
A representative of the Complex 5 Preparation Committee said, "The majority chose the trust method, and we are preparing accordingly. Before signing the main contract with the trust company, we will obtain resident consent forms on whether to select the trust company as the project implementer, and more than 70% of residents who review the main contract must agree to select the trust company as the implementer. Deciding on the trust method does not mean we have to sign a disadvantageous contract."
Complex 5 is preparing a redevelopment plan to build up to 49 floors and 3,832 households, with public inspection ongoing until the 23rd of this month. Complex 5 was built in 1986 and consists of 1,848 households in 15-floor buildings, with exclusive areas ranging from 65 to 152 square meters.
Besides Complex 5, Complexes 2, 9, 10, 11, 13, and 14 have selected preliminary trust companies. Complex 1 initially selected Korea Land Trust as the preliminary trust company but canceled it and plans to select a new trust company this month. Complex 1 conducted a resident vote and found over 70% agreement for the trust method, and plans to select a trust company with financial stability.
A representative of the Complex 1 Preparation Committee said, "We will promote the trust method as much as possible but will select the preliminary trust company after reviewing financial stability, experience, and capabilities through the preparation committee's deliberation. Since we cannot arbitrarily select a preliminary trust company, we will try to go through the resident consent process as much as possible."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
