"Samsung C&T's construction division prepared to provide about 960 million won per unit to the members. However, the competitor (Daewoo E&C) proposed suggestions that had been utilized in other business sites, but not a single one has been kept." (Jeong Seong-moon, Director General of Samsung C&T's Gangnam office)
"Daewoo E&C will maximize the revenue from general sales and minimize project expenses to alleviate the burden of contribution fees for the members," he emphasized. "We have put in 37 more units for general sale than Samsung C&T, with a total of 2,224 households. We plan to provide 230 million won in profit per member household." (Choi Gi-ho, head of the urban regeneration project team at Daewoo E&C)
On the 29th, a fierce battle of nerves between Samsung C&T and Daewoo E&C over the reconstruction project was held at the promotional center for the Gaepo Woosung 7th apartment reconstruction located near Ilwon-dong, Gangnam-gu, Seoul.
◇Samsung C&T: "Daewoo E&C's claim of providing additional revenue from sales is contradictory"
In the afternoon at 12 p.m., in the promotional center for the Gaepo Woosung 7th apartment reconstruction established on the 4th floor of the Daewon building in Ilwon-dong, Gangnam-gu, Director General Jeong Seong-moon emphasized that if the Gaepo Woosung 7th apartment reconstruction members choose Samsung C&T, they can receive benefits close to 1 billion won per unit.
Director General Jeong noted, "Compared to Daewoo E&C, Samsung C&T will return about 735.7 billion won in benefits to members, including costs for construction selection (23 billion won), permits (36.4 billion won), relocation (240.3 billion won), commencement (50.3 billion won), completion (44.3 billion won), and future value (341.4 billion won). When converted, this means about 960 million won per member (769 households)," adding that "Daewoo E&C proposed the contradictory content of providing an additional revenue of 101.5 billion won despite having a smaller apartment sale area than Samsung C&T."
In particular, Samsung C&T criticized Daewoo E&C for maximizing sales revenue through reducing rental housing and proposing a project expense interest rate of CD+0%.
Director General Jeong pointed out, "The Seoul city government requires the remaining area, excluding the area allocated to the members from the total sale area and the number of rental homes according to legal rates, to be sold as general sales." He noted, "Daewoo E&C arbitrarily deleted 37 rental homes and is claiming to increase general sales by that much, which is an act of overreach towards the Seoul city government."
He added, "Daewoo E&C claims it will secure project costs at an interest rate of CD+0%, but this only applies to essential project costs representing 1% of the total project cost, amounting to 17 billion won. The remaining 99% of the actual project costs must be secured at higher interest rates by Daewoo E&C, which has a credit rating of A compared to Samsung C&T's AA+."
Additionally, Samsung C&T introduced an instance where Daewoo E&C was stripped of construction rights from the reconstruction (Raemian One Pentas) project and Samsung C&T was selected as the new contractor.
Director General Jeong explained, "Samsung C&T reflects all proposal contents in the contracts, so the contract negotiation period for Shinbanpo 15th is about one month, while the Banpo Jugong 1 Complex 3 District is about two months," adding that "Despite the fact that it is legally impossible for contractors to pay relocation loan interests, Daewoo E&C proposed zero interest on the entire relocation loan and was later sued by the Shinbanpo 15th reconstruction association, ultimately losing the construction rights."
He stated, "Daewoo E&C also proposed zero interest on relocation loans for Gaepo Woosung 7th, but modified the contract so that they could separately receive payment for construction costs later," and noted, "Samsung C&T made about 80 modifications to the contract compared to the members' proposal, of which 70 reflect the proposal, and the remaining 10 clarify Samsung C&T's legal rights, and the responsibilities and obligations of the association."
In response, a Daewoo E&C official stated, "We never proposed zero interest on relocation costs in our proposals, contracts, or other promotional materials," expressing strong regret over the dissemination of false information by a competitor.
◇Daewoo E&C: "We have lower interest competitiveness than Samsung C&T... maximizing general sale revenue"
Daewoo E&C also fiercely attacked Samsung C&T's proposals. At the promotional center for the Gaepo Woosung 7th apartment reconstruction, set up on the 2nd floor of the Solim building in Ilwon-dong, Gangnam-gu, at 3:30 p.m. the same day, explanations were primarily focused on how Samsung C&T's proposals were inferior to those of Daewoo E&C.
Choi Gi-ho, head of the urban regeneration project team at Daewoo E&C, stated, "Daewoo E&C fixed the interest rate for essential project costs at CD+0%, while Samsung C&T proposed a variable interest rate linked to the lowest rate at the time of financial procurement. Also, the contribution fees that members pay later will be structured so that Daewoo E&C will receive 100% payment at the time of balance, so there will be no mid-term loan interest."
Choi added, "Samsung C&T cleverly included the clause of financial procurement by users, which implies that the members will need to take out loans," noting, "At the time of the final payment, they must include interest as well."
Daewoo E&C clarified that there are no issues with Samsung C&T's claim regarding the 'construction costs from sales revenue' condition in the contract. It explained that deleting the phrase 'no late fee will be charged if construction costs are insufficient' from the contract is due to the structure in which no late fees occur.
Choi noted, "The payment method for construction costs given to the contractor is divided into sales revenue and construction costs from sales revenue. Generally, the contractor prefers payment from sales revenue, as general sellers pay the contract fee of 10% at the time of commencement; if it is from sales revenue for 700 billion won in construction, the contractor can immediately take 70 billion won, whereas for construction costs from sales revenue, the first payment must be made from the project costs used by the association before requesting the remaining amount as construction costs, so late fees themselves do not arise."
Daewoo E&C emphasized that it will maximize revenue from general sales and minimize project expenses to alleviate the burden of contribution fees for the members. They stated that choosing Daewoo E&C would result in savings of over 470 billion won compared to Samsung C&T, including construction revenue (101.5 billion won), project cost lending interest (75 billion won), inflation conditions (91 billion won), construction cost repayment conditions (90 billion won), finishing materials (40 billion won), and the connection construction cost with Daechung Station (40 billion won).
Choi noted, "In particular, Daewoo E&C placed 2,224 units for general sale, which is 37 units more than Samsung C&T (2,187 units)," adding, "By increasing the allowable floor area ratio, they reduced rental apartments by 19 units and applied a unique design only for Daewoo E&C to add three more units, aiming to provide about 101.5 billion won in profits, or 230 million won per member household."
◇Gaepo Woosung 7th, excellent location and academic district makes competition 'intense'
The reason the promotional competition between Samsung C&T and Daewoo E&C is so intense it has escalated to slandering each other is that Gaepo Woosung 7th is located in an area known for excellent location, academic districts, and living infrastructure in Gangnam, Seoul.
Gaepo Woosung 7th is located close to prestigious schools including Gaepo Elementary School, Daechung Middle School, and Daechung High School, and is also near the 학원가 (academy area) of Daechi-dong and Dogok-dong. It is also the last reconstruction site in the Gaepo residential development area of Gangnam, Seoul.
Moreover, as Samsung C&T and Daewoo E&C have faced each other in the core maintenance project area of Gangnam, Seoul, for the first time in five years, it is believed that both companies are engaged in a pride-driven competition.
In 2020, Samsung C&T and Daewoo E&C competed for the construction rights for the Banpo Jugong 1 Complex 3 District renovation, with Samsung C&T ultimately selected as the contractor.
The Gaepo Woosung 7th reconstruction project is a scheme to create 1,122 apartments and ancillary welfare facilities over a site of 48,984 square meters, located at 15, Gaepo-ro 110-gil, Gangnam-gu, Seoul, with underground 5 floors and above ground 35 floors. The Gaepo Woosung 7th reconstruction association plans to hold a general meeting to select a construction company on August 23.