GS Construction's 850 Billion PF for the Carefully Developed 'Seoul Sangdo-dong Jangseungbaegi Jiju Housing'

HI Investment & Securities Leads Syndicate Recruitment
'Handling Fees Alone 14 Billion Won' DGB Financial Affiliates Expected to Participate
Consortium States "95% Site Secured, No Issues Anticipated for Project Approval"

[Asia Economy Reporter Lim Jeong-su] The Sangdo-dong regional housing association in Dongjak-gu, Seoul, has begun raising 850 billion KRW in project financing (PF) funds for the construction of the large-scale apartment complex "Sangdo Starrium." GS Construction, which has been dedicated to this project for a long time, is participating as the contractor and providing a completion guarantee agreement, while Hi Investment & Securities is acting as the lead arranger for the PF.

According to the investment banking (IB) industry on the 10th, the Sangdo Starrium regional housing association has started recruiting a PF lending syndicate worth 850 billion KRW with Hi Investment & Securities as the lead manager. Hi Investment & Securities recently distributed an investment memorandum (IM) to prospective institutional investors, stating that the PF loans will be divided by collateral and repayment priority into senior tranche of 630 billion KRW, mezzanine tranche of 180 billion KRW, and junior tranche of 40 billion KRW for syndicate recruitment.

The investment terms are set at an all-in annual rate of 4.20% including a 1.5% handling fee for the senior tranche. The mezzanine tranche is set at 5.50% including a 1.5% fee, and the junior tranche at 8.0% including a 5.0% fee. The maturity of the PF loan is five years. The deal is considered large-scale and highly profitable, with fees paid to the syndicate exceeding 14 billion KRW.

The lending syndicate is expected to include DGB Financial Group affiliates such as Daegu Bank and Hi Investment & Securities, along with other securities firms, capital companies, and savings banks. Hi Investment & Securities previously led the bridge loan fundraising for land acquisition, supporting 760 billion KRW in funding. Mugunghwa Trust is participating as the trustee.

The raised funds will be used to repay existing borrowings (bridge loans) taken for land acquisition and for construction and other project expenses. The association plans to build 10 buildings ranging from five basement floors to 38 above-ground floors on a 56,193㎡ site at 182-13 Sangdo-dong, consisting of 2,003 apartment units, neighborhood living facilities (4 buildings), retail facilities, and a kindergarten. Of the apartments, 1,743 units are allocated to association members, and the remaining 260 units will be sold as rental housing at cost by SH Corporation.

GS Construction will be responsible for construction and provide a completion guarantee agreement for the PF loan. If the construction is not completed and approved for use within the deadline, GS Construction will provide joint guarantees for the PF debt. The construction contract is expected to be finalized in January.

This project site is known to have been a long-term focus for GS Construction and Hi Investment & Securities. Since it is a regional housing project with many existing tenants, land acquisition was difficult, and they took on significant risks, including guaranteeing the bridge loan, to ensure the project's success.

The association expects no major issues in obtaining project approval, having met the requirement of securing over 95% of the land needed for approval. For land not yet purchased, they plan to acquire additional parcels through purchase claims and negotiated acquisitions.

An IB industry official said, "Although there were many initial objections to the project, causing delays in securing the site, most of the land has recently been acquired, allowing the project to accelerate. Only project approval and eviction procedures remain, so there should be no problems in raising the PF funds."

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