Due to the continued downturn in the real estate market, the restructuring policies for project financing (PF), including the economic and public auction platform and funds prepared by financial authorities and the financial sector, are not functioning properly. The financial authorities see this as the last opportunity for PF restructuring and are urging the financial sector.
According to the financial sector on the 7th, of the 385 business sites listed on the PF information disclosure platform of the financial authorities (based on exposure of 6.7 trillion won), 178 (46.2%) have not scheduled bidding dates. The appraised value of these business sites amounts to 5.36 trillion won.
Previously, as unsuccessful auctions continued at business sites conducting economic and public auctions, subsequent properties have not commenced their sale processes. This signifies that it is difficult to find new owners through economic and public auctions. The number of business sites open for public sale on the platform increased by 16 compared to the previous month. Consequently, excluding unavoidable reasons such as lawsuits, all publicly offered business sites were disclosed on the platform.
There are also several malicious business sites that have failed to find buyers despite undergoing more than five rounds of sales. The hotel business site, valued at 850 billion won, with Mokpo Central Saemaul Geumgo as the main creditor, has been completed but has failed 25 times in auctions. A multi-unit residential business site in Boryung also failed to sell after 19 attempts. Even in Seoul, where the real estate market is relatively good, finding new owners is proving difficult. A neighborhood living facility in Geumcheon-gu has failed 12 times, an officetel in Guro-gu 13 times, and an apartment in Songpa-gu 8 times. Among the 178 business sites that could not initiate bidding, there were 57 in the metropolitan area and 121 in provincial areas. In light of these circumstances, the financial authorities recently deleted information on the number of unsuccessful auctions for business sites publicly offered on the economic and public auction platform.
It has been reported that only four cases (approximately 459 billion won) of a maximum 5 trillion won PF syndicate loan (a collective lending scheme formed by multiple financial institutions) have been executed as of February, aimed at normalizing PF in collaboration with banks and insurance sectors last year. The syndicate loan was established in June last year to provide funding to operators who acquired business sites that were put up for economic and public auction. Although it was initially planned to establish a fund of 1 trillion won and increase it to a maximum of 5 trillion won based on market conditions, it has not yet reached even 1 trillion won after ten months.
The third fund for real estate PF management in the savings bank sector also fell short of the initial target of 500 billion won, finishing at only 200 billion won. Reports suggest that the decline in real estate demand, difficulties in price negotiations, and delays in due diligence on business sites have hindered fund formation. The savings banks have decided to immediately initiate the formation of a fourth fund.
In the financial sector, there are expectations that the pace of PF restructuring will quicken only if interest rates fall further and the real estate market recovers in provincial areas. However, commercial banks predict that even if interest rates decline, it will be difficult for the real estate market to recover soon due to increased economic uncertainty stemming from U.S. tariffs.
A source at a commercial bank noted, “Regarding the syndicate loan, there were complaints about the stringent conditions, but there are also challenges in finding applicants for loans even if we want to provide them,” adding, “In provincial business sites, simply lowering the interest rate and lowering the bidding price may not attract buyers.”