SK ecoplant scrapped its plan to develop an apartment complex in the station area around Mongchontoseong Station in Songpa District, Seoul, and decided to sell the project to the state-run Korea Housing & Urban Guarantee Corporation (HUG). SK ecoplant had provided credit support for loans exceeding 200 billion won together with major investment firms for the project, but, amid concerns about slow sales, it abandoned the yearslong project without even breaking ground. After trying to sell apartments in an area dense with entertainment venues, the project was delayed for years and will ultimately be turned into rental dwellings by a public corporation.
According to the development industry on the 17th, the development and construction rights for the "Bangi-dong lot 56 apartment construction project" in Songpa District are expected to be transferred to HUG at the end of this month. The project calls for building two towers with six basement levels and 27 above-ground floors, totaling 472 apartment units and ancillary welfare facilities, on lot 56 in Bangi-dong near Mongchontoseong Station on Seoul Subway Line 8 and 10 adjacent parcels.
In 2023, SK ecoplant, together with investors including Koramco REITs Management and Trust and Management, KB Securities, and NH Investment & Securities, established "K-Square Eco Songpa PFV" to carry out the project. A project finance vehicle (PFV) is a special purpose company (SPC) set up to raise and manage funds for specific projects such as large-scale real estate development. SK ecoplant held 19.9% equity, while NH Investment & Securities (14.9%), KB Securities (14.9%), Koramco REITs Management and Trust (10%), and Koramco Asset Management (0.3%) also held equity.
The PFV secured a 234 billion won bridge loan to purchase land, and SK ecoplant also provided credit support to assume responsibility if the loan was not repaid. The asset management company (AMC) role was handled by Koramco Asset Management, and SK ecoplant, an investor, was slated to carry out construction.
However, the project was delayed for three years and is set to be sold in bulk to HUG this month. A source said, "This month, a REIT (real estate investment trust) formed by HUG plans to acquire the land and project execution rights," adding, "The PFV will be liquidated, and under REIT rules, only SK ecoplant among the investors will hold a portion of the REIT equity."
The project, initially planned for sales, will be converted entirely to rental dwellings. The asset management company will be INK Asset Management, established by HUG, and SK ecoplant will step away from construction. An industry source said, "SK ecoplant and other investors decided to drop the project due to concerns about possible slow sales and the burden of more than 200 billion won in PF loan credit support."
Initially, SK ecoplant planned to build 472 units applying a building coverage ratio of 58.5% and a floor area ratio of 674.98%, selling 323 units to the general public and supplying 149 units as station-area long-term jeonse dwellings (known as Shift). Station-area long-term jeonse dwellings are homes for which the Seoul city government grants floor area ratio incentives to private development projects within 350 meters of a subway station, and, in return, a portion of the increased dwellings is supplied as jeonse to people without homes for up to 20 years at 80% or less of market price.
But as the possibility of slow sales was raised, the bridge loan was not converted to the main PF for years, and SK ecoplant, which provided credit support exceeding 200 billion won, and others concluded they could not continue the project.
Some also note it was a development that failed to factor in location from the start. Because the project site belongs to one of the three Gangnam districts, near Jamsil-dong in Songpa District and close to Mongchontoseong Station on Seoul Subway Line 8, they say the risk of slow sales was not properly considered.
Bangi-dong in Songpa District is the same legal dong, but residential demand is high for Bangi 1(il)-dong, which is close to the Bangi-dong academy district and prestigious school districts. By contrast, Bangi 2(i)-dong, adjacent to Seokchon Lake, Bangi-dong food alley, and Sincheon-dong, has significantly lower residential demand because it is an area dense with entertainment and lodging facilities such as bars and motels. Taking out loans exceeding 200 billion won to sell apartments in Bangi 2(i)-dong suggests the location analysis was not conducted with sufficient precision.
A real estate industry source said, "Because it is a place dense with entertainment and lodging facilities for adults, it is not an easy environment for selling apartments, and it seems that was not taken into account."