Doosan Construction, Once a Sore Spot, 'Revives' as Housing Sales and Orders Recover

[Asia Economy Reporter Kim Min-young] Doosan Construction, currently undergoing a sale process, was a major construction company ranked within the top 10 in construction capability evaluations in the early 2010s, a decade ago. However, the crisis began when the developer went bankrupt in 2009 and the Ilsan Doosan We've the Zenith experienced about 10 years of unsold units. The Tanhyeon Doosan We've the Zenith, launched in 2009, was a luxury residential-commercial complex apartment that aimed to rival Tower Palace in Ilsan. However, the global financial crisis that broke out the same year triggered a large-scale unsold unit situation.

Doosan Construction's funding for the Ilsan Zenith project was procured through project financing (PF), but the large-scale unsold units led to increased financial costs, deepening the crisis. Eventually, in 2018, Doosan Construction sold large unsold units at a discount, resulting in a loss of 164.6 billion KRW. Meanwhile, Doosan Construction was delisted in December 2019, and its construction capability evaluation ranking dropped to 25th in 2020.

Park Jung-won, the chairman currently leading Doosan Group, is known to have a strong attachment to Doosan Construction. This is because Park was recognized for his management skills while serving as CEO and chairman of Doosan Construction from 2008 to 2011, during the time he was being spotlighted as the next chairman. Despite the financial crisis spreading from Doosan Heavy Industries to Doosan Group, it is interpreted that Park’s attachment is the reason Doosan Construction was supported for 10 years.

Doosan Construction, once considered the sore spot of Doosan Group, has changed since last year. Starting early last year, Doosan Construction has revitalized itself by strengthening housing sales and orders. Since 2019, Doosan Construction has successfully sold large complexes such as Busan Beomil-dong Doosan We've the Zenith Harbor City and Central Saha, making the housing business a cash cow. With the rise in apartment prices and a favorable sales market continuing, as of the third quarter this year, cumulative operating profit reached 54.3 billion KRW, more than doubling compared to 23.8 billion KRW in the same period last year. Net borrowings have also drastically decreased from 1.731 trillion KRW in 2010 to 102.6 billion KRW in the third quarter this year. New orders for housing maintenance projects, which were nonexistent last year, have exceeded 1 trillion KRW this year.

As Doosan Construction shows signs of revival, Doosan Group appears to be accelerating the sale of its stake in Doosan Construction. Last September, Doosan Group’s sale negotiations with Daewoo Industrial Development fell through. Doosan Heavy Industries, the parent company of Doosan Construction, holds 99.99% of its shares. With the recent boom in the housing market, Doosan Group is reportedly proceeding with the sale of 99.99% of Doosan Construction shares held by Doosan Heavy Industries to the Q Capital consortium after 1 year and 3 months. The total sale amount is reported to be around 400 billion KRW.

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