GS Engineering and Construction is expected to be selected as the new builder for a project to develop the former KT Tower site in Mok-dong, Yangcheon-gu, Seoul, into a residential complex of up to 48 stories.
This development project saw HDC Hyundai Development Company, Shinsegae Engineering & Construction, and then Samsung C&T's construction division (Samsung C&T) all drop out, judging it difficult to secure profitability, and GS Engineering and Construction has moved to obtain the construction rights.
According to the construction industry on 16th, GS Engineering and Construction convened an internal investment review committee on Sept. 29 and, after discussing an agenda item to join as the builder for the former KT Tower site development in Mok-dong, approved it on the 30th.
The former KT Tower site development in Mok-dong is a project to build 658 officetel units and neighborhood living facilities in a complex ranging from six floors underground to 48 floors above ground on the former KT Tower site totaling 16,415.7 square meters at 924 Mok-dong, Yangcheon-gu, Seoul.
Iconic, the project operator, plans to conclude a construction contract with GS Engineering and Construction within this month and convert a 610 billion won bridge loan into the main project financing (PF).
A GS Engineering and Construction official said, "We are actively reviewing participation as the builder for the former KT Tower site development in Mok-dong."
The former KT Tower site development in Mok-dong has had many twists and turns. Because of a lack of business viability due to rising raw material and labor costs and worsening conditions in the project financing (PF) market, the builder has changed multiple times.
In 2019, HDC Hyundai Development Company signed a construction contract worth about 250 billion won with Iconic. However, after the spread of COVID-19, it judged that business viability had declined due to increases in construction costs and labor costs, and in Jan. 2023 it terminated the construction contract.
Shinsegae Engineering & Construction was later selected as the new builder but gave up the construction rights in Jan. last year. As the real estate market slumped, risks for bridge loan business sites grew, making it harder to secure PF lead lenders. In addition, because sales rates were low at officetel business sites it owned in the provinces, it is interpreted that restoring financial soundness was deemed more important.
Samsung C&T's construction division joined as the new builder after signing a construction contract worth about 700 billion won with Iconic in Oct. last year. Samsung C&T showed strong intent by saying it would apply its high-end apartment brand "Raemian" to this officetel for the first time. However, after deliberating over business viability issues, Samsung C&T also gave up the construction rights after about a year.
A source analyzed, "This business site secured a large plot even in Mok-dong, where housing is scarce, so it had commanded the exclusive attention of major builders for five years," while adding, "Since 2019, construction raw material prices and labor costs have risen rapidly, builders have been replaced one after another, and during that period, bridge loan interest expense kept piling up while refinancing continued, eroding business viability."
The person added, "I understand that GS Engineering and Construction internally agonized over signing a construction contract for a large business site that Samsung C&T had stepped away from," while saying, "The fact that it is a large business site in Mok-dong—where academic fervor is high even within Seoul, housing preference is strong, and new builds are scarce—served as a decisive factor for joining the construction."