[Exclusive] Daejang-dong Development, 100 Billion KRW Increase in Project Cost After Separation and Decrease in Rentals

Daejang-dong and 1st Industrial Complex Separate Development Implementation Plan, Then Seongnam Mayor Lee Jae-myung Directly Approved... Rental Units Reduced by 100, Sale Units Increased by 200, Indicating Profit Expansion

[Asia Economy Reporter Bae Kyunghwan] It has been confirmed that the project cost increased by more than 100 billion KRW during the process of separating Seongnam 1 Industrial Complex from the Daejang-dong development project. Although the project scale was reduced, the project cost actually increased. The prosecution has also secured related documents through a search and seizure at Seongnam City Hall, and this is expected to become a variable in the investigation process regarding whether Lee Jae-myung, the Democratic Party presidential candidate (current Governor of Gyeonggi Province), committed breach of trust.

According to a Seongnam City report obtained by Asia Economy on the 18th, Lee directly approved the implementation plan in November 2016 to separately develop Daejang-dong and the 1 Industrial Complex. The approval document signed by Lee at the time included an increase in project costs and detailed changes to the housing supply plan. As confirmed by this outlet, the document shows that the project cost, which was 1.234 trillion KRW when Daejang-dong and the 1 Industrial Complex were developed jointly, actually increased to 1.3371 trillion KRW after the separation, rising by about 100 billion KRW.

A Seongnam City official stated, "In the Daejang-dong development, Seongnam City invested only 2.5 billion KRW through Seongnam Urban Development Corporation, which it owns 100%," adding, "The increased project cost was borne by the private developer."

However, there are criticisms that the client in this mega project worth over 1 trillion KRW did not carefully examine the process before and after the 100 billion KRW increase in project costs, which led to the current situation. In fact, after the separation, the project scale decreased and compensation costs were reduced by nearly 200 billion KRW, but construction costs alone increased by 33 billion KRW, and other unspecified costs were budgeted at over 200 billion KRW. Investigation and design costs also increased, and Lee was reported on this document containing detailed project cost selection items.

The problem is that the increased project cost led to a process of reducing the number of rental housing units through re-investigation and redesign. The total 1,532 units of public rental housing originally allocated to blocks A10 (267 units) and A11 (1,265 units) during the joint development were reduced by about 100 units to a total of 1,421 units in blocks A9 (221 units) and A10 (1,200 units) after the area name change and redesign.

On the other hand, Hwacheon Daeyu, which secured four apartment blocks (A1, A2, A11, A12) through a private contract with the project implementer Seongnam Utddeul, increased the number of units for sale from 1,778 to 1,964, nearly 200 units more. This was made possible by adjusting the floor area ratio in some areas. Initially, the Daejang-dong development applied a uniform floor area ratio of 180%, excluding the row house project area (150%), but after the separation, the floor area ratio rose to 195% centered on Hwacheon Daeyu’s project area. Essentially, rental units were reduced and sale units increased to maximize project profitability.

The special investigation team of the Seoul Central District Prosecutors’ Office, which conducted a search and seizure at Seongnam City Hall last week, also confirmed that they secured the relevant documents. Although the search did not include the mayor’s office or the secretariat, documents were collected through departments such as the Urban Housing Bureau, which was responsible for the Daejang-dong development permits.

In the legal community, it is believed that the investigation team has extended the investigation to include Lee, who was the mayor of Seongnam at the time. Since Lee directly received reports and approved both the project cost increase and changes in housing supply quantities, these documents could serve as evidence to determine breach of trust charges.

Including this document, the investigation will also look into whether Seongnam City was involved in or neglected the breach of trust by former Seongnam Urban Development Corporation Planning Director Yoo Dong-gyu (detained), based on other documents approved by Lee. The investigation will also cover the circumstances under which the ‘excess profit recovery regulation’ was deleted and why the dividends that went to Seongnam Urban Development Corporation were concentrated on Hwacheon Daeyu.

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