Eleven Geon, GS Construction Refinances Funding for Gimpo Gochon Site Secured by Joint Guarantee

[Asia Economy Reporter Lim Jeong-su] Eleven Construction has secured project financing (PF) refinancing funds borrowed from financial institutions to acquire land in the Gimpo Gochon district. Due to its own credit rating issues, it succeeded in raising funds by obtaining joint guarantees from the contractor, GS Construction.

According to the investment banking (IB) industry on the 19th, Eleven Construction recently raised PF funds worth 150 billion KRW under the management of Kyobo Securities. It is an ultra-short-term loan with a maturity of 43 days and a lump-sum repayment condition at maturity.

Eleven Construction will use the procured funds to repay the borrowed money used to secure the site for the Shingok 6 District multi-family housing (apartment) in Gochon-eup, Gimpo-si, Gyeonggi-do. Eleven Construction had previously raised 211 billion KRW in funds with a two-month maturity in May for site acquisition.

Eleven Construction selected GS Construction as the contractor for the development of the Gimpo Gochon district. They set a goal to start construction in August and complete it in September 2023, two years and one month later.

GS Construction, the contractor, provided a joint guarantee to Eleven Construction during the PF fund-raising process. This was because Eleven Construction’s own credit rating was unstable, making it difficult to raise funds without a guarantee from a major contractor. GS Construction is reported to have secured preferred shares of the Gochon district project site as collateral in exchange for the joint guarantee.

The site of Block 3 (BL) in Shingok 6 District, Gochon, is a place where Eleven Construction purchased at a high price, leading to criticism that a high sale price is inevitable. Eleven Construction won the bid for Block 3-2 at 220 billion KRW, about 40 billion KRW higher than the expected price of 180 billion KRW by construction companies.

Eleven Construction also faced controversy over high purchase prices after winning the bid for the Yongsan UN Command site at 1.0552 trillion KRW, about 200 billion KRW above the expected price. Recently, the development project has come into sight after passing environmental impact assessments and architectural reviews. However, it carries the burden of having to succeed in the project with approval of the business plan and high sale prices.

An IB industry official expressed concern, saying, "Eleven Construction has secured project sites by bidding prices far exceeding appropriate values," adding, "Whether pre-sale or post-sale, if they fail to succeed in high-priced sales, they may suffer from the winner’s curse."

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