HDC Hyundai Development Company: "Compensation in Kind at Initial Sale Price for Unsold Non-Residential Units in Front Zone 1"

Plan to Maximize Union Members' Profits Proposed
Additional 850 Million Won per Union Member Household
Measures to Address Unsold Unit Risks Also Presented

HDC Hyundai Development Company has proposed a plan to maximize the profits of union members in the redevelopment of Yongsan Maintenance Depot Front Zone 1. The company has also presented a condition that, in the event of unsold units, compensation for commercial and office spaces will be made at the higher amount between the initial sale price or the appraised value.

Perspective view of Yongsan Maintenance Depot Front Zone 1 proposed by HDC Hyundai Development Company. Provided by HDC Hyundai Development Company

On April 29, HDC Hyundai Development Company proposed a profit maximization plan for union members, which would secure an additional 5,651 pyeong of saleable area compared to the original plan for Front Zone 1, and generate an extra 375.5 billion won in sales revenue. Under this proposal, each union member household would receive an additional profit of 850 million won.

HDC Hyundai Development Company also presented measures to mitigate the risk of unsold units resulting from the expanded saleable area. In the event of unsold residential or non-residential units, the company guarantees compensation in kind at the higher amount between the initial general sale price or the appraised value at the time of completion. The intention is to preemptively block any risk of increased contributions from union members or deterioration of the project's profitability, regardless of whether unsold units occur.

While residential facilities around Yongsan Station are trading at over 80 million won per pyeong, commercial facilities face difficulties in activation, as evidenced by some vacancies still remaining at Yongsan Prugio Summit, which was completed in 2017.

In particular, Yongsan Maintenance Depot Front Zone 1 has a non-residential facility ratio exceeding 50%, making the sale of non-residential spaces a decisive factor for the project's profitability. Assuming non-residential facilities in Front Zone 1 are sold at the prevailing market price, the sales revenue based on the original plan is estimated to be around 2 trillion won. If the unsold rate reaches 20%, sales revenue would decrease by 400 billion won; if it reaches 30%, the decrease would be 600 billion won.

An industry insider emphasized, "In major redevelopment projects conducted last year, all companies that offered compensation in kind at the initial sale price for unsold commercial and other non-residential facilities were selected as contractors. This is a critical issue directly linked to union members' profits, which they cannot compromise on."

Meanwhile, POSCO E&C, which is competing for the construction contract for Front Zone 1, has proposed to compensate in kind for commercial facilities at the management disposition standard price, not the initial sale price, and to take responsibility for leasing office facilities instead of compensation in kind. POSCO E&C also promised to attract a comprehensive medical examination center to the commercial facilities.

The redevelopment of Yongsan Maintenance Depot Front Zone 1 involves the construction of 12 buildings ranging from six basement levels to 38 above-ground floors, including 777 apartment units, 894 officetel units, sales and neighborhood living facilities, and office spaces in the area of 40-641 Hangangno 3-ga, Yongsan-gu. The union will hold a joint briefing session next month and a general meeting in mid-June to finalize the selection of the contractor.