LH Announces Public Offering for Private Developers of Rural Return Housing Development REITs

Supply Package for Hwaseong Dongtan 2 Apartment Land and Hadong-gun Return-to-Farming Residential Land
Specialized Architectural Plans for Apartments... Energy-Saving Designs for Return-to-Farming Houses
Letter of Intent Submission from Next Month 14-16, Priority Negotiation Candidates Selected in September

[Asia Economy Reporter Kangwook Cho] Korea Land and Housing Corporation (LH) is inviting private sector participants for the ‘Return-to-Farming and Rural Housing Development REIT Project’ to address the drawbacks of rural housing projects with low profitability.

LH announced on the 31st that it will accept letters of intent from private sector participants for the Return-to-Farming and Rural Housing Development REIT Project from June 14 to 16.

The ‘Return-to-Farming and Rural Housing Development REIT’ project supplies rural housing sites together with profitable urban multi-family housing sites to a REIT for housing construction and supply. A consortium (private sector participant) composed of financial institutions and construction companies establishes the REIT, with financial institutions handling funding and construction companies responsible for building and supplying the housing.

LH participates as the REIT Asset Management Company (AMC), supplying multi-family housing sites and rural housing sites as a package to the REIT, overseeing the overall project including the selection of private sector participants. Additionally, LH reduces the business risk for private participants by providing purchase commitments for unsold multi-family housing units. Local governments assist with administrative support and community program linkage to help residents settle in their return-to-farming and rural relocation.

The multi-family housing units sold by construction companies will feature specialized architectural plans such as △energy and noise reduction design △air-clean systems △IoT-based home networks △community facilities, and will be supplied at reasonable prices to genuine homebuyers under the price ceiling system.

Meanwhile, rural housing units will be leased by the REIT for four years before being converted to sale. The rental conditions for rural housing are cheaper than market prices, with over 50% of the supply allocated to return-to-farming and rural relocation applicants currently living in urban areas, and the remaining units supplied to local residents. These houses will be built as complex-type homes with yards and storage, as well as low-maintenance zero-energy houses. The housing complexes will also include communal vegetable gardens and community facilities to foster community building.

The sites open for bidding are the multi-family housing site A-56BL (77,180㎡, 800 units) in Dongtan 2 New Town and the rural housing site (25,794㎡, fewer than 30 units) located in Agyang-myeon, Hadong-gun, Gyeongnam Province. The Dongtan 2 New Town A-56BL multi-family housing site is located in the New Residential Culture Town Special Planning Zone, with resident recruitment scheduled for the second half of 2022 and move-in planned for the end of 2024. Agyang-myeon, Hadong-gun, Gyeongnam Province, is near the setting of Park Kyung-ri’s epic novel “Toji,” including the Choi Champan House, Pyeongsari fields, and the entrance to the Jirisan Hyeongjebong hiking trail, with resident recruitment planned for the second half of 2022 and move-in targeted for the first half of 2024.

The bidders are private sector participants consisting of consortia formed by financial institutions and construction companies. Financial institutions must have a capital of at least 100 billion KRW or total capital of at least 300 billion KRW, and construction companies must be registered housing construction businesses under the Housing Act. Each consortium must include at least one financial institution and one construction company, with participation limited to no more than two companies each. Consortiums formed by construction companies ranked within the top 10 in construction capability evaluation are not allowed.

LH will select project participants through quantitative and qualitative evaluations. The ‘quantitative evaluation’ criteria include △customer proposals (commitment rate for purchasing multi-family housing) △whether the REIT stock public offering plan is reflected △financial and construction companies’ capabilities (project performance, financial stability, construction capability, credit rating). The ‘qualitative evaluation’ criteria include △financial plans (profitability, sales and rental operation plans) △development plans (complex and architectural specialization plans). Additional points will be awarded to companies realizing social values (such as excellent labor-management culture companies and companies participating in work-study dual systems).

The bidding schedule is △submission of letters of intent (June 14?16) △submission of project applications (August 27) △selection of preferred negotiation candidates (September).

An LH official stated, “The Return-to-Farming and Rural Housing Development REIT Project is a project that LH, a public corporation, has successfully combined profitable urban and non-profitable rural projects to realize a housing project in rural areas that was previously unfeasible due to low profitability. This will simultaneously achieve housing supply in the metropolitan area and revitalization of rural areas.”

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