Three Consortia in Daejang-dong Development Speak with One Voice: "Low Risk, High Return"

Hana Bank Consortium "Abundant Waiting Demand... Expecting Superior Profitability"
Industrial Bank Consortium "Sufficient Demand, High Price and Sale Competitiveness"
Meritz Consortium "Gangnam Area Demand Alternative... Price Increase Expected"

All three financial institution consortiums?Hana Bank, Korea Development Bank, and Meritz Comprehensive Financial Securities?that participated in the bidding for the Daejang-dong development project in Seongnam-si, Gyeonggi Province, were pointed out to have projected high profitability, stating that "the project has good feasibility and low risk."

Part of the submission materials from Hana Bank consortium / Provided by Assemblyman Park Su-young's office.

◇ "Daejang-dong, good feasibility and low risk" = According to an analysis of the 'business plans' submitted by the three consortiums to Seongnam Urban Development Corporation by the office of Park Soo-young, a member of the National Assembly's Political Affairs Committee from the People Power Party, all three evaluated that the location conditions are favorable and demand is high, resulting in good project feasibility and low risk through business feasibility analysis and risk management plans.

The selected Hana Bank consortium analyzed that "there is abundant pent-up demand for new supply" and "expects a profit margin significantly higher than existing successful project cases."

The Korea Development Bank consortium stated, "Considering the excellent location conditions of the project site, demand for the land is expected to be sufficient," and "sales of commercial and public land are expected to be favorable, similar to other residential development districts."

Meritz also evaluated that "due to new demand, substitution demand, and investment demand, leasing will be easy and sales prices are expected to rise," and that the site "can stand out as an alternative location capable of absorbing demand from the Gangnam area."

Part of the materials submitted by the Korea Development Bank consortium / Provided by the office of Assemblyman Park Su-young.

◇ "Minimizing land compensation and permit risks through Seongnam Urban Development Corporation" = One of the reasons the consortiums could anticipate high profitability and low risk was that the permit risk was supported by Seongnam Urban Development Corporation.

Hana Bank included in its business risk analysis and management plan that "Seongnam Urban Development Corporation will support permit-related tasks," planning that the public institution, Seongnam Urban Development Corporation, will assist with permit-related liaison work and promote land compensation agency work and contract execution.

Korea Development Bank also assessed the project's characteristics by stating, "Permit risk can be minimized through land compensation agency and related permit support by Seongnam Urban Development Corporation," and explicitly noted that "the active parties sharing permit and land compensation risks are public investors."

Meritz similarly wrote that through the roles of project promotion entities, Seongnam Urban Development Corporation "will support land compensation agency and related permit tasks (such as infrastructure creation and installation, development plan changes, district unit plans, etc.)."

Partial materials submitted by Meritz Comprehensive Financial Securities Consortium / Provided by Assemblyman Park Su-young's office.

◇ Profitability over 15% relative to project cost = The profitability predicted based on the consortiums' business feasibility analysis was also found to be very high.

The profit margin relative to project cost was highest at 24.3% by Hana Bank, followed by 18.74% by Korea Development Bank. Meritz did not specify but it is estimated to be about 15%. Considering that in the construction industry a profit margin over 15% relative to project cost is expected to yield reasonable returns, the 24.3% proposed by Hana Bank is a very high figure.

The profit margin relative to sales was also highest at 19.5% by Hana Bank, followed by 15.86% by Korea Development Bank, and 11.3% by Meritz.

The 'Seongnam Urban Development Corporation Establishment Opinion Hearing Proposal' submitted in 2011 by then Seongnam Mayor Lee Jae-myung included the statement that "a net profit of 313.73 billion KRW is expected from the Daejang-dong urban development, with a return on investment of 29.2%."

Assemblyman Park pointed out, "Typically, the three major risks in urban development projects are land compensation risk, permit risk, and sales risk," adding, "The business plans specify that land compensation and various permits will be supported and shared by Seongnam Urban Development Corporation, and the project feasibility was also evaluated as very good."

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