PF Stabilization Fund Injected: Project Viability Enhanced Through Senior Debt Acquisition and Public Auction
KCC Construction Selected as Preferred Negotiator for Main Contractor
This project involves constructing a new office building and neighborhood living facilities with a total floor area of approximately 29,400 square meters (8,893 pyeong) and six basement floors and ten above-ground floors in the area of 269 Seongsu-dong 2-ga, Seongdong-gu, Seoul. To carry out the development, Koramco established the "Koramco Seongsu Private Equity Investment Limited Company No. 158" fund and will serve as the project implementer, overseeing land acquisition, project planning, construction management, and overall asset management.
Initially, Taeyoung Construction was expected to be the largest shareholder, contributing project funds and handling land acquisition and construction. However, the project faced difficulties at the bridge loan stage before groundbreaking due to a sharp rise in interest rates and increased raw material costs. When Taeyoung Construction declared a workout, the project also stalled.
To normalize the project, Koramco first acquired the senior creditors' bonds to secure project rights. The company was able to secure the entire site by acquiring some of the remaining land through public auction. The land obtained through the auction was won at 106.5 billion KRW, about 60% of the original appraised value of 180.4 billion KRW, after several failed auction attempts. Recently, KCC Construction was selected as the preferred negotiating party for the main contractor, and discussions on the construction contract are underway.
Koramco will utilize the "PF Project Normalization Support Fund" established by Korea Asset Management Corporation (KAMCO). In 2023, when the PF crisis was at its peak, KAMCO contributed 500 billion KRW to help normalize PF projects that were either distressed or at risk of becoming distressed. Five delegated asset management companies (Shinhan Asset Management, IGIS Asset Management, Capstone Asset Management, KB Asset Management, and Koramco Asset Management) each raised over 100 billion KRW in private funds, creating a fund totaling about 1 trillion KRW. The fund was established to immediately restart distressed projects that risked being left idle for long periods, thereby minimizing unnecessary social and economic costs and stabilizing the construction market.
Koramco combined 14.5 billion KRW in private funds with KAMCO's contribution to create a total fund of 24.5 billion KRW. By creating the largest fund among the delegated management companies, Koramco has been recognized for its project selection capabilities and asset management expertise as a specialized real estate management company.
The Seongsu-dong 2-ga (Yeonmujang-gil) area, where the project site is located, is emerging as a "new business district" where companies based in content, fashion, and IT?including Krafton, Musinsa, Gentle Monster, and MGRV?are actively competing to acquire assets for headquarters or office space. The area is within walking distance of Seongsu Station and Konkuk University Station on Subway Line 2, and future transportation infrastructure expansions such as GTX-C (Wangsimni) and the Dongbuk Line are also planned, which is expected to drive continued value appreciation.
Kim Taewon, Executive Vice President and Head of Domestic Real Estate at Koramco Asset Management, stated, "The normalization of the Seongsu office development project will not simply restart a halted site, but will serve as a model case for PF normalization by dramatically enhancing the project's viability through restructuring." He added, "As a responsible AMC with both expertise and efficiency, Koramco will strive not only for quantitative results but also to contribute to the revitalization of the local area and the broader economy."
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