Daewoo E&C Proposes 'Reconstruction REITs' Project for Banpo 3rd District (Comprehensive)

[Asia Economy Reporter Yoo In-ho] Daewoo E&C announced on the 16th that it will promote a ‘reconstruction REIT business’ through the REIT asset management company AMC (Asset Management Company) established in December last year.

Daewoo E&C explained that the method involves utilizing the general sale portion of housing in the reconstruction project as a REIT to operate as rental housing, and then selling it to the public after the operation period ends.

The reconstruction project’s union can supply the remaining portion of the housing provided to union members according to the management disposition plan to the general public. At this time, the ‘Regulations on Housing Supply,’ a subordinate rule of the Housing Act, must be followed. However, if the union contributes the general sale portion to the REIT in kind, the aforementioned supply regulations do not apply. This means the union directly invests in the REIT without general sales to generate profits.

The REIT receives the housing contributed in kind from the union, reflecting the appraisal market price, and returns stocks to the union. The stocks received in this way can be traded with others or offered publicly during the REIT operation period. The REIT entrusts a professional housing management company to operate the supplied housing, and after the mandatory operation period ends, the housing can be optionally sold at the price desired by the union.

Daewoo E&C plans to apply the reconstruction REIT business starting with the recently bid ‘Banpo 1st Complex 3rd District Reconstruction Project.’ Last year, Daewoo E&C established Together Investment Management, a REIT AMC, to leap forward as a ‘comprehensive real estate developer company.’

Subsequently, through recent subsidiary integration, Daewoo ST was launched to provide integrated management from building defect repairs to maintenance. Together with these companies, Daewoo E&C plans to promote the reconstruction REIT business using D.Answer (Daewoo E&C Comprehensive Real Estate Service), a service that performs real estate contracts and management.

A Daewoo E&C official said, “The reconstruction REIT allows the housing supplied by the union to be evaluated at a reasonable price, and anyone from the general public can have an opportunity to indirectly invest in reconstruction apartments,” adding, “We have completed the review of related laws and regulations concerning the reconstruction REIT business, and it can align with the government’s real estate policy intent, growing into a new business model that distributes appropriate profits to both reconstruction unions and the general public.”

However, there are concerns that Daewoo E&C’s business plan has the intention to avoid the price ceiling system, making it uncertain whether the Ministry of Land, Infrastructure and Transport, the competent authority, and the Seoul Metropolitan Government, the relevant local government, will approve it.

In fact, the reconstruction union of Shinbanpo 3rd Complex and Gyeongnam Apartments (Raemian One Bailey) also attempted to sell the entire general sale portion to a private rental business operator, but it was halted due to opposition from the government and Seoul City.

A Ministry of Land, Infrastructure and Transport official said, “Since this is a matter that must be reflected in the maintenance plan, it is difficult to strictly judge matters not included in the plan,” adding, “It seems similar to the case of the Raemian One Bailey whole-sale sale attempt.”

This content was produced with the assistance of AI translation services.