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 Maintenance Zone redevelopment project, which has attracted attention as the largest redevelopment initiative 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 standoff drags on, the project itself could be derailed.

According to the maintenance industry on December 17, the Seongdong Police Station conducted a search and seizure of the Seongsu Strategic Maintenance Zone District 1 union office on December 12. This was the first compulsory investigation following the union president’s indictment on charges of breach of trust. The investigation is reportedly focused on determining whether the president attempted to misappropriate the difference in costs by having the delegates approve lower-cost materials, rather than the premium finishes 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 concerns about the union specifying certain brand names in the finishing material standards for the contractor selection plan. The union initially set guidelines to use finishing materials of equal or higher quality than those of Company A and Company B 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 all unions in the district on December 16, advising them to avoid specifying individual brands in material lists, citing concerns about possible collusion with suppliers.

Amid these circumstances, the union will hold a delegates’ meeting on December 26 to organize a general meeting for contractor selection. With the investigation ongoing and the emergency committee pushing for the dismissal of the union president, the meeting may only serve to highlight the depth of the internal conflict. However, if the agenda is approved, a contractor bidding notice will be issued on December 31. The general contractor selection meeting is scheduled to be held at the end of April next year.

In District 2, the project lost momentum after the union president voluntarily resigned. The selection process for a contractor was suspended after the president stepped down following an incident involving a Posco E&C public relations officer (OS staff). It is expected that the union will need to elect a new executive branch and president at a general meeting in March next year before contractor selection can resume. The general contractor selection meeting is not likely 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

The repeated internal strife is hindering the contractor selection process. The bidding war in District 2 was expected to be a three-way competition among Samsung C&T, Posco E&C, and DL E&C, but both Samsung C&T and Posco E&C withdrew from the bidding, nullifying the competitive tender. Subsequently, even DL E&C, which was expected to secure the contract by default, decided not to participate due to ongoing internal conflicts within the union. While Samsung C&T resumed promotional activities ahead of the second round of bidding, it is reportedly hesitant to participate because of the persistent infighting.

In District 3, the union has reignited the project by reappointing Haeahn Architecture, whose selection had previously been canceled by the Seongdong District Office, as the project designer. The union initially selected Haeahn Architecture as the designer in August, but the district office recommended a new competition, stating that the proposed design did not comply with the maintenance plan. In the second round of bidding held in October, Haeahn Architecture was the sole bidder and was selected as the preferred negotiating partner for a private contract. The union plans to revise the design to comply with the maintenance plan and proceed with the integrated review process. While the district office has stated 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 only accelerate if the union members reach a compromise on their respective interests. Yoon Jihae, head of the Research Lab at Real Estate R114, commented, "The Seongsu Strategic Maintenance Zone is unlikely to be completely halted due to its highly sought-after location, but the key is how efficiently and swiftly it can proceed. Only a union with strong leadership that can find common ground will be able to speed up the project."