Union President Resigns Amid Police Investigation... Seongsu Strategic Maintenance Zone Falters [Real Estate AtoZ]

District 1: Union Office Raided by Police
Allegations of Switching to Lower-Cost Finishes
District 2: Preparing for New Executive Leadership
Concerns Over Failed Competitive Bidding Amid Deepening Internal Strife

The Seongsu Strategic Redevelopment Zone project, which has drawn attention as the largest redevelopment project in northern Seoul with a total project cost of 8 trillion won, has hit a major obstacle due to internal conflict within the union. There are growing concerns that if the situation drags on, the project itself could be derailed.

According to the redevelopment industry on December 17, the Seongdong Police Station conducted a search and seizure of the Seongsu Strategic Redevelopment Zone District 1 union office on December 12. This was the first compulsory investigation following the union president being accused of breach of duty. The investigation is reportedly focused on whether the union president attempted to misappropriate the price difference by passing lower-cost materials through the delegates' council, instead of the finishing materials approved by the board of directors.

On September 9, 58 members of the Seongsu 1 District union held a rally condemning the executive committee near the union office. Photo by Lee Ji-eun

Some union members have also raised issues with the union specifying certain brand names in the finishing material standards table of the construction company selection plan. The union presented guidelines stating that finishing materials of the same or higher grade as those from Company A and Company B should be used for about 60 items, including main entrances and elevator tiles. After controversy arose, other brand names were also included. In response, the Seongdong District Office sent an official notice to unions in the district on December 16, advising them to refrain from specifying individual brands, as this could raise suspicions of collusion with suppliers.

Amid these circumstances, the union will hold a delegates' council meeting on December 26 to convene a general meeting for the selection of a construction company. With the investigation ongoing and the emergency response committee pushing for the dismissal of the union president, the meeting may only serve to confirm the depth of the conflict. However, if the agenda passes, a tender notice for construction companies will be announced on December 31. The general meeting for the selection of a construction company is scheduled for the end of April next year.

In District 2, the project lost momentum after the union president voluntarily resigned. The selection process for the construction company was halted when the president stepped down following an unfortunate incident involving a POSCO E&C public relations officer (OS officer). It is expected that the process to select a construction company can only begin once the union elects a new executive committee and president at a general meeting in March next year. The general meeting for the selection of a construction company is not expected to be held until June of the same year.

Old low-rise buildings stand in a row around the Seongsu 2 District. Photo by Lee Ji-eun

Repeated internal strife has become a stumbling block for the selection of a construction company. The bidding competition in District 2 was initially expected to be a three-way race among Samsung C&T, POSCO E&C, and DL E&C, but with Samsung C&T and POSCO E&C both withdrawing from the bidding process, the competitive tender was canceled. Subsequently, even DL E&C, which was expected to win the contract by default, chose not to participate due to ongoing internal disputes within the union. Samsung C&T resumed promotional activities ahead of the second round of bidding, but is reportedly hesitant to participate because of the continued infighting within the union.

In District 3, the union has resumed the project by reselecting Haeahn Architecture, which had previously been disqualified by the Seongdong District Office, as the project designer. The union had selected Haeahn Architecture as the designer in August, but the district office recommended a new tender, stating that the proposed design did not comply with the redevelopment plan. In the second tender held in October, Haeahn Architecture was the sole bidder and was designated as the preferred negotiator for a private contract. The union plans to legally revise the design to comply with the redevelopment plan and proceed with the integrated review process. While the district office has stated that it will not take separate administrative action, there are concerns that the revised design could be rejected during the integrated review process in the future.

Experts predict that the pace of the project will pick up only if union members reach a compromise regarding their respective interests. Yoon Jihae, head of the Research Lab at Real Estate R114, said, "Thanks to its highly coveted location, the Seongsu Strategic Redevelopment Zone project is unlikely to be completely halted, but the key is how efficiently and quickly it can proceed. Only a union with strong leadership that can find common ground will be able to accelerate the project."