[Issue] Stalled Gwangcheon-dong Redevelopment, Ongoing Talks on Construction Costs and Sale Prices... "Striving for Amicable Agreement"

Largest Private Redevelopment Project in Gwangju with 5,000 Households and 3 Trillion Won in Project Costs
Hyundai: 20.9?24 Million Won per Pyeong vs. Association: 26.5?28.5 Million Won per Pyeong
Association Claims 680 Billion Won Increase in Construction Costs...Progress to Be Shared at General Meeting in April

The redevelopment project in Gwangcheon-dong, Seo-gu, Gwangju (approximately 5,000 households and project cost in the 3 trillion won range) is continuing negotiations over construction costs and the general pre-sale price. The association and the contractor, Hyundai Engineering & Construction, are holding additional talks but have yet to reach an agreement.

According to coverage compiled by The Asia Business Daily on February 24, the Gwangcheondong Housing Redevelopment and Maintenance Project Association and Hyundai Engineering & Construction are continuing discussions focused on the scale of the increase in construction costs and the level of the general pre-sale price. The two sides have been negotiating these issues since last year.

Bird's-eye view of the Gwangcheon-dong, Seo-gu, Gwangju redevelopment and maintenance project. Provided by Hyundai Engineering & Construction

The Gwangcheon-dong redevelopment project is a maintenance project being pursued over an area of about 425,368 square meters in and around Gwangcheon-dong, Seo-gu, Gwangju. It is planned as a complex of roughly 5,000 households, with the project cost estimated to be in the 3 trillion won range. It is considered one of the largest private redevelopment projects in Gwangju.

Since the designation of the maintenance zone in 2012, the project has gone through approval for the establishment of the association in 2015, project implementation approval in 2019, and management and disposition approval in 2023. Subsequently, termination and re-selection of the contractor, as well as lawsuits with occupants on the site, delayed the construction start schedule. In September last year, the Gwangju District Court upheld the association's claim for delivery of the real estate, and in October, the City of Gwangju designated this area as the first special architectural zone in the region.

The core of the current negotiations is construction costs and the general pre-sale price. The association explains that at the time of the provisional contract in 2023, the two sides agreed on a level of 5.88 million won per pyeong. Afterwards, Hyundai Engineering & Construction presented construction costs of 7.26 million won per pyeong, and according to the association, the increase amounts to about 680 billion won.

The two sides also differ over the general pre-sale price. Taking into account the risk of unsold units, Hyundai Engineering & Construction has proposed a level of 20.9 million to 24 million won per pyeong, while the association, citing the need to minimize the financial burden on members, is demanding at least 26.5 million to 28.5 million won per pyeong.

Regarding the background to the increase in construction costs, a Hyundai Engineering & Construction official stated, "Between the selection of the contractor in 2022 and the actual start of construction, the construction environment has changed significantly, including higher raw material prices and increased labor costs." On the negotiations, the official added, "We have conveyed our position that agreement is possible through value engineering (VE) and adjustments to finishing materials, and we will continue discussions to reach an amicable agreement with the association." On the construction schedule, the official said, "We are doing our utmost in negotiations with the association and have no plans to change the schedule."

On December 8 last year, a notice reading "Dangerous Structure: Do Not Approach" was posted on the wall of the redevelopment zone in Gwangcheon-dong, Seo-gu, Gwangju. The site is a development project worth about 3 trillion won and is planned to be built into around 5,000 housing units, including up to 45-story apartment buildings, ancillary facilities, and parks. Song Bohyeon, Reporter

The Gwangcheon-dong redevelopment project includes a plan to remodel and preserve as a historical space one building of the Citizens' Apartments, the first row house complex in Gwangju and the site where Deulbul Night School operated during the May 18 Democratization Movement.

Regarding the future schedule, the association plans to brief its members depending on the progress of the negotiations.

An association representative said, "Negotiations are ongoing, and both Hyundai Engineering & Construction and the association are trying to reach a result by making concessions where each side can," adding, "We expect to be able to report related matters to our members at a general meeting around April."