Trust Company and Some Owners Begin Negotiations
Disagreement Over Number of Units and Exclusive Area Ratio
Owners Stage Protest Against Trust Company
Amid internal conflict at Yeouido Plaza Apartment (28 Beonji) over a maintenance plan that would increase the number of units by 2.4 times, Korea Asset Trust, the project implementer, and some owners have begun discussions on the design proposal. Other complexes that are either pursuing or planning to pursue reconstruction through the trust method are closely watching the outcome of these negotiations, but the talks are not expected to proceed smoothly. The trust company has proposed an alternative plan to reduce the number of units compared to the existing maintenance plan and to increase the exclusive area ratio. However, the owners have strongly opposed this proposal, stating that it is unacceptable.
1314 Units, Approx. 70% Exclusive Area Ratio VS 1111 Units, 72% or Higher Exclusive Area Ratio
According to Asia Economy's coverage on the 22nd, Korea Asset Trust held an emergency meeting with some owners of Plaza Apartment on the 18th.
The trust company proposed to reduce the number of reconstructed units from 1,391 to 1,314 and to raise the exclusive area ratio from 67% to approximately 70%. The maximum number of floors would also be lowered from 56 to 49. If reconstruction proceeds according to the trust company's proposal, the number of general sale units would decrease to 519, and rental units would decrease to 219, assuming all owners receive allocation without liquidation. This is a reduction of 64 general sale units and 13 rental units compared to the previous maintenance plan (583 general sale units and 232 rental units).
One of the main issues is the proportion of small units (under 84㎡, the national housing size standard), which will be reduced to about 60% of the total. This decision was made after the previous maintenance plan, which set small units at 67.86% of the total, sparked backlash from owners.
However, the owners have stated that they cannot accept this proposal. They point out that the increase in the number of units is excessively high compared to other reconstruction complexes in Yeouido. In fact, after reconstruction, the number of units at Yeouido Gongjak Apartment and Daegyo Apartment only increased by about 1.5 times. As a result, some owners are demanding that the number of units at Plaza Apartment be reduced to 1,111, with the exclusive area ratio raised to 72-75%, and the maximum number of floors kept at 49 or below, with the total number of floors in the five buildings not exceeding 235.
Some owners have also staged protests against Korea Asset Trust. On the 21st, about 20 owners held a demonstration in front of the Korea Asset Trust headquarters in Gangnam-gu, Seoul, holding signs such as "67% Exclusive Area Ratio Beehive Apartment" and calling for a revision of the maintenance plan. In response, Korea Asset Trust stated, "We have been conducting smooth negotiations with the owners, and this protest occurred because the owners have not reached a consensus among themselves."
Profitability Expansion vs. High-End Reconstruction... Diverging Goals of Trust Company and Owners
The current conflict began in April when the trust company proposed a revised maintenance plan to reconstruct the complex into five buildings of up to 56 floors and 1,391 units. Some owners, who wanted the apartment to be transformed into a high-end complex after reconstruction, protested that the excessive increase in the number of units would lower the value of the apartments and significantly reduce the proportion of resident space compared to the supplied area.
There are also observations that the trust company and the owners have fundamentally different goals for the project. The trust company needs to maximize sales revenue by increasing the number of units, while the owners, as future residents, place greater importance on the long-term value of the apartment complex. In particular, the revenue from general sales is directly tied to the trust company's profitability. In the case of Korea Asset Trust, although the maximum commission is capped at 24 billion won, the company also receives 2% of the total sales as a fee, making profitability a critical factor.
The trust company argued that if reconstruction proceeds according to the owners' demands, the project's profitability could drop significantly. A representative from Korea Asset Trust said, "The figure of 1,391 units was derived by considering both profitability and optimal layout, and it is still below the legal floor area ratio limit. If the number of units is reduced to 1,111, the total saleable area is estimated to decrease by about 8,500 pyeong, and applying the average sale price in the Yeouido area, this could result in a revenue loss of about 560 billion won." The representative added, "Although reducing the number of units would save on construction costs, the decrease in sales revenue would be even greater, leading to significant losses."
On the other hand, the owners argue that increasing the number of general sale units will also increase the number of rental units, thereby increasing the losses borne by residents. Owner A of Plaza Apartment said, "The total saleable area is fixed, so if general sales increase, rental units will also increase proportionally. Every additional rental unit results in losses of several hundred million won for residents, making it essential to reduce the number of units."
Owners of Yeouido Plaza Apartments are holding a protest on the 21st in front of the Korea Asset Trust building in Gangnam-gu, Seoul, demanding revisions to the maintenance plan. Photo by Reader Provided
With the gap between the two sides remaining wide, there are concerns that the project itself could be delayed. Plaza Apartment completed the public inspection of the revised maintenance plan in August last month and is now awaiting review by the Urban Planning Committee. Korea Asset Trust stated, "We are continuing to adjust the number of units and the exclusive area ratio in consultation with the owners and will continue to gather their opinions and negotiate going forward."
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