Hoban Group (construction) will build a mixed-use residential and commercial complex more than 40 stories high in Hwanggeum-dong, Suseong District, Daegu. The land for the complex was taken on by Hoban after the developer failed to repay a 400 billion won project financing (PF) loan that Hoban covered on its behalf. To recover the money it paid, Hoban put the land up for public auction. But with no bidders willing to take the land at auction, the company recently shifted course to develop it in-house.
Left as a vacant lot for five years, the site sits near Daegu's well-known adult nightclub "Hangukgwan." A self-developed project, with Hoban Group handling both development and construction, carries high risk of not recouping funds if units go unsold. Still, the lack of new apartment supply in Daegu starting next year could positively affect sales for this project.
As of the 31st, according to the development industry, Hoban Group recently converted "Hoban Summit Golden Sky," a mixed-use residential and commercial development in Hwanggeum-dong, Suseong District, Daegu, which had been slated for land sale, into a self-developed project. The company will not sell the land but will develop it directly. A Hoban Group official said, "This reflects the firm will of the group's top management to take responsibility for the project to the end," adding, "It also aims to inject vitality into the Daegu area, which has fallen into a construction slump, by creating jobs through the development."
The project site covers 19,181.2 square meters at 851-13 Hwanggeum-dong, Suseong District, Daegu. Although Cross 143 Holdings, the original developer, secured the land with a PF loan in 2021, construction did not start for five years and it remained a vacant lot. Cross 143 Holdings had planned to build a complex of 823-unit multifamily housing, an officetel, and neighborhood living facilities, with five basement floors and 43 above-ground floors. It obtained a 365 billion won PF loan in Nov. 2021 and refinanced with a 400 billion won loan in Aug. 2024. In the process, Hoban Group provided a joint guarantee, and when the developer failed to repay, Hoban made the payment instead. According to the Financial Supervisory Service, Cross 143 Holdings posted a net loss of 34.6 billion won in 2023 and 36.4 billion won in 2024.
After Hoban Group repaid the PF loan to the lending syndicate, it put the Hwanggeum-dong site, which had been pledged as collateral, up for public auction in the second half of last year. However, no one bid to take the land during the auction held from September to October. Even after the minimum bid price was cut from 330 billion won to 275 billion won, it still failed to find a new owner.
The site remained a vacant lot for over five years due to a combination of Daegu City's tighter regulations and locational factors. Since June 2021, Daegu has strengthened the floor area ratio (FAR) cap for buildings in commercial zones that applied for architectural review. When building a mixed-use residential and commercial complex in a central commercial zone, the FAR for residential-use apartments and officetels in the building was limited to up to 450%, and in general commercial zones the FAR was limited to up to 430%. Typically, to secure business viability for mixed-use developments, a residential-use FAR of at least 700% must be allowed so that high-rise apartments can be built and the developer can turn a profit. For this reason, Cross 143 Holdings applied for architectural review before the regulation took effect and passed a conditional review in Nov. 2021 with an FAR exceeding 700%. The current FAR for this project site is 767.5%.
Although it obtained architectural review early out of concern about tighter rules, the project kept getting delayed as the spread of COVID-19, the regional construction slump, and rising unsold inventory overlapped. The industry also analyzes that the fact that the Hwanggeum-dong area is dense with entertainment venues acted as a stumbling block for a large-scale mixed-use development. Very close to the site is Hangukgwan, a nightclub, and the area is crowded with lodging businesses and bars. Hangukgwan, together with "Ba bam ba," is one of Daegu's representative adult nightclubs and is a three-minute walk from the project area.
In fact, the nearby "Hillstate Hwanggeum Station Reserve complexes 1 and 2," completed in 2024, offered discounted sales at the time of pre-sales due to such locational weaknesses. An industry official said, "Hwanggeum-dong has not been favored as a residential area within Suseong District because it is dense with entertainment venues, and I understand this negatively affected the Golden Sky mixed-use development and its sales."
Within commercial facilities, no residential buildings other than mixed-use complexes can be built. Pure apartment complexes cannot be constructed, and part of the building must be filled with officetels and retail. For this reason, Hoban, which involuntarily came to hold the land, has only two options: sell the land or build a mixed-use complex.
Still, given the Daegu real estate market, where there will be virtually no apartment supply starting next year, the development of the Hoban Summit Golden Sky mixed-use complex could be completed successfully. Lee Byong-hong, a professor in the Department of Finance and Real Estate at Daegu Science University, said, "Starting next year, there will be no apartment move-ins in Daegu, and the city is inclined toward easing regulations, so there is a possibility of promoting new apartment development around Hwanggeum-dong," adding, "This trend will positively affect the development and sales of the Hoban Summit Golden Sky mixed-use complex."