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The Yongsan International Business District Project, a large-scaled development plan in central Seoul, is on the brink of collapse, mainly due to a lack of funds and conflict among shareholders, industry sources said on Sunday.
As of Dec. 21, the remaining funds of the Dream Hub PFV consortium, which leads the 31 trillion won ($29 billion) development project, amount to 6.5 billion won and funds are expected to run out before the year-end unless additional money is secured, the sources said.
The consortium is likely to be disbanded early next year if it fails to pay interest on its asset-based securities, which amounts to 4.7 billion won, by the deadline on Jan. 17 next year.
The consortium was launched in 2007 under the leadership of the state-run Korea Railroad Corp. to develop 565,800 square meters near Yongsan Station, located in central Seoul, into an international business district by 2016. The project had gained momentum after the relocation of the U.S. army in the Yongsan district was decided.
But the development project was hit by the protracted slump in the real estate market, caused by the global financial turmoil of 2008. Since then, investors in the project have been reluctant to inject additional funds.
Another issue threatening the project is conflict among shareholders. At the beginning of the development project in 2007, the main shareholders were Korail (25 percent), the National Pension Service (10 percent) and Seoul City (4.9 percent). The remaining 60.1 percent equity was held by private constructers, including Samsung C&T Corp. and Lotte Tour.
With the business environment deteriorating, Samsung C&T pulled back from the project, trusting its entire shares to Lotte Tour in 2010. As of now, Lotte Tour is the largest shareholder with a 70.1 percent stake in Dream Hub. Korail has clashed with Lotte over the terms of funding and development.
To secure more funding, the consortium issued convertible bonds worth 250 billion won on Dec 12, but it failed to meet the funding target.
“It is critical to get support from the next government to put the development project on track,” a Korail official said, adding that it is updating the development plan to reflect changing conditions to proceed with the project.
By Seo Jee-yeon (jyseo@heraldcorp.com)
As of Dec. 21, the remaining funds of the Dream Hub PFV consortium, which leads the 31 trillion won ($29 billion) development project, amount to 6.5 billion won and funds are expected to run out before the year-end unless additional money is secured, the sources said.
The consortium is likely to be disbanded early next year if it fails to pay interest on its asset-based securities, which amounts to 4.7 billion won, by the deadline on Jan. 17 next year.
The consortium was launched in 2007 under the leadership of the state-run Korea Railroad Corp. to develop 565,800 square meters near Yongsan Station, located in central Seoul, into an international business district by 2016. The project had gained momentum after the relocation of the U.S. army in the Yongsan district was decided.
But the development project was hit by the protracted slump in the real estate market, caused by the global financial turmoil of 2008. Since then, investors in the project have been reluctant to inject additional funds.
Another issue threatening the project is conflict among shareholders. At the beginning of the development project in 2007, the main shareholders were Korail (25 percent), the National Pension Service (10 percent) and Seoul City (4.9 percent). The remaining 60.1 percent equity was held by private constructers, including Samsung C&T Corp. and Lotte Tour.
With the business environment deteriorating, Samsung C&T pulled back from the project, trusting its entire shares to Lotte Tour in 2010. As of now, Lotte Tour is the largest shareholder with a 70.1 percent stake in Dream Hub. Korail has clashed with Lotte over the terms of funding and development.
To secure more funding, the consortium issued convertible bonds worth 250 billion won on Dec 12, but it failed to meet the funding target.
“It is critical to get support from the next government to put the development project on track,” a Korail official said, adding that it is updating the development plan to reflect changing conditions to proceed with the project.
By Seo Jee-yeon (jyseo@heraldcorp.com)
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Articles by Korea Herald
