This article was published on March 13, 2025, at 4:13 p.m. on the ChosunBiz RM Report site.
It was confirmed on the 13th that Shinsegae Group has initiated a legal battle against Korea Water Resources Corporation as the 4.6 trillion won investment in the Gyeonggi Suwon International Theme Park complex development project (Star Bay City) is at risk of being canceled due to compensation fees imposed by the corporation.
According to the retail industry, Shinsegae Property and Shinsegae Engineering & Construction, part of the Emart group, recently filed a lawsuit with the Seoul Central District Court against Korea Water Resources Corporation (K-water) for a confirmation of non-existence of debt aimed at extending the construction deadline. The lawsuit argues that the deadline should be reset to prevent K-water from imposing compensation fees.
Earlier, K-water notified Shinsegae that it would impose a compensation fee of 15.5 million won per day for the delay in commencing the Suwon theme park project. The total compensation amount reaches 5.66 billion won annually. According to the bidding guidelines, if Shinsegae does not start construction on the main facilities by March 18 of this year, they will have to pay the compensation, as the site has not even broken ground due to delays in the permitting process, including its designation as a tourism complex.
The delay in the permitting process is due to allegations that Shinsegae purchased the development site from K-water at a very low price, prompting an investigation by the Board of Audit and Inspection. The board has been auditing K-water since October 2021 and discovered that Shinsegae's payment amount (3.256 billion won) was determined based on a significantly undervalued appraisal from K-water. The board concluded that K-water had provided preferential treatment to Shinsegae by violating bidding guidelines and disciplined three K-water employees involved.
This project is currently under review as the city of Suwon has submitted an application for tourism complex designation to Gyeonggi Province. It is expected that it will take more than a year to complete all administrative procedures. If construction begins as planned in the second half of next year, the compensation fees to be paid would exceed 10 billion won.
K-water plans to cancel the land lease contract in accordance with bidding guidelines if Shinsegae fails to pay the compensation fees. If the contract is terminated, the contract price of 32.56 billion won, which accounts for 10% of the land lease price for tourism and leisure purposes, will be forfeited as a penalty to Korea Water Resources Corporation, and the business agreement between the two companies will also be automatically terminated.
Shinsegae filed a lawsuit to prevent the imposition of compensation fees, stating that it cannot accept such a disposition. They believe that the theme park project is proceeding smoothly according to a separate business agreement signed with K-water, arguing that the delays are due to unavoidable circumstances resulting from prolonged audits by the Board of Audit and Inspection.
However, industry insiders believe that Shinsegae will not abandon the project due to the compensation fee issue. The project, with a budget of 4.6 trillion won, represents an ambitious initiative by Chung Yong-jin, the chairman of Shinsegae, and is a core new business for the group. The company is facing a downturn in its primary retail sector due to competition from e-commerce platforms like Coupang, making it essential to find new opportunities. The fact that Shinsegae acquired the rapidly appreciating Suwon site at a low price also adds to the reasons it cannot abandon the project.
Shinsegae Property and Shinsegae Engineering & Construction, leading this project, established a joint venture named Shinsegae Hwaseong in September 2020 and injected a total of 198.5 billion won through seven rounds of capital increases from December of the same year to March this year. Such large-scale project acquisition is also necessary for Shinsegae Engineering & Construction, which is facing a liquidity crisis.
A Shinsegae official stated, "It is correct that we filed a lawsuit to reset the construction deadline," adding, "However, we are communicating smoothly with Korea Water Resources Corporation, and there are no issues with the permitting process. The project is progressing well." However, K-water declined to respond, stating that further verification on this matter is needed.
The location of the project site is reclaimed land in Song-san Green City, Hwaseong, Gyeonggi Province. The plan is to create a complex comprising a theme park, water park, Starfield, golf course, hotel and resort, and multifamily housing on a site of 1.27 million pyongs (approximately 4.2 million square meters).
Shinsegae was selected as the preferred negotiator for this project in 2019 when it formed a consortium. In October of last year, the global media group Paramount Global was recruited as the intellectual property (IP) partner for the theme park. Construction is set to begin next year, with the goal of opening by 2029.