Korean Air Resolves Songhyeon-dong Site Sale Dispute After 10 Months... Contract to Be Finalized Within the Year

Seoul City is promoting a plan to change the Korean Air site, currently an empty lot in Songhyeon-dong, Jongno-gu, into a 'Cultural Park' under urban planning facilities. On the 28th, the city announced that it submitted the 'Songhyeon-dong Korean Air Site Park Decision Plan' for consultation at the Urban and Architecture Joint Committee held on the 27th. The decision plan includes changing the site, currently designated as a special planning zone within the Bukchon district unit plan, into a cultural park. The photo shows the Korean Air site in Songhyeon-dong, Jongno-gu, Seoul, which Korean Air is currently promoting for asset sale. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Dongwoo Lee] The conflict surrounding Korean Air's Songhyeon-dong site was resolved about 10 months after filing a grievance complaint with the Anti-Corruption and Civil Rights Commission (ACRC) in June last year.

On the 31st, Korean Air announced that a mediation agreement for the sale of the Songhyeon-dong site among Korean Air, Seoul City, and Korea Land and Housing Corporation (LH) was signed in the form of a written agreement under the auspices of the ACRC.

Korean Air, Seoul City, and LH agreed to make their best efforts to conclude the sales contract and exchange contract by the end of August, considering the time required for administrative procedures such as the Seoul City Council's resolution. They plan to complete all procedures within the year and ensure the payment of the sale price. However, the mediation agreement did not specify exact dates or the sale amount.

According to the mediation agreement, LH will purchase the Songhyeon-dong site from Korean Air and then exchange it with one of the city-owned lands held by Seoul City.

This outcome reflects a compromise among Korean Air's urgent need to sell idle assets in preparation for the prolonged COVID-19 pandemic, Seoul City's intention to create a park on the Songhyeon-dong site to return it to citizens, and LH's position to secure land within Seoul for expanding housing supply.

The procedure for determining the sale price of the Songhyeon-dong site was specified in the mediation agreement. To ensure a fair price evaluation, it was agreed that appraisals from four corporations would be conducted, followed by a review by the Korea Association of Property Appraisers, and the price would be determined through an arithmetic evaluation. There is precedent for selecting four or more corporations for appraisal in cases that have attracted significant public attention and potential disputes. Accordingly, it is expected that a fair and appropriate appraisal will be conducted for the Songhyeon-dong site as well.

The mediation agreement was largely facilitated by months of mediation and efforts by the ACRC. Despite the clear differences in positions among the institutions, the ACRC played a significant role in achieving a smooth mediation agreement.

Korean Air, having recently succeeded in a 3.3 trillion KRW rights offering, expects that this mediation agreement will provide relief for raising funds for the acquisition of Asiana Airlines and improving its financial structure.

Meanwhile, the issue of the Songhyeon-dong site arose in early 2020 when Seoul City announced plans to convert the site into a park. Korean Air intended to sell the Songhyeon-dong site to the private sector as part of its urgent liquidity securing efforts and self-help measures under funding support agreements with creditor banks due to COVID-19. However, Seoul City's sudden announcement of the park plan blocked the path for private sale, leading Korean Air to file a grievance complaint with the ACRC in June 2020.

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