Gangnam Also Chooses Trust Over Association... '1990s Troika' Seocho Sampung Public Bidding

Sampung "Trust Company and Shintong Planning to Shorten by 6 Years"
Recently Entered Precise Safety Inspection Procedure for Reconstruction
Trusts Gaining Attention for Strong Negotiation Power Amid Contractor Conflicts

Seocho Sampung, once considered one of the top luxury apartments in Korea along with Apgujeong Hyundai and Jamsil Asia Athlete Village in the 1990s, is now pursuing reconstruction through a trust-based method. Traditionally, in the Gangnam area where profitability is high and owners have strong influence, the cooperative association method has been preferred. However, due to severe side effects such as project delays caused by conflicts with construction companies over rising construction costs, the trust-based method is gaining attention even in Gangnam.

According to the maintenance industry on the 22nd, the Sampung Apartment Reconstruction Promotion Preparation Committee in Seocho-dong, Seocho-gu, Seoul (hereafter Sampung Preparation Committee) recently announced a bidding notice to select a preferred trust company. The trust method involves a trust company leading each stage of the maintenance project, such as project implementation approval and management disposition approval, on behalf of the owners. This method was officially introduced following the revision of the Urban and Residential Environment Maintenance Act in March 2016. A representative of the Sampung Preparation Committee explained, "This is a procedure to select an excellent company capable of successful collaboration among the 14 domestic trust companies," adding, "We plan to appoint a preliminary trust implementer as quickly and transparently as possible."

Sampung Apartment is a large complex with 24 buildings, up to 15 floors, and a total of 2,390 households, completed in 1988. Until the early 2000s, it was considered one of the three major luxury apartments along with Hyundai in Apgujeong-dong, Gangnam-gu, and Asia Athlete Village in Jamsil-dong, Songpa-gu. As the last large complex built in Gangnam, it was highly popular, recording a competition rate of 10 to 1 despite having the highest pre-sale price at the time of sale in 1986 (1.33 million KRW per 3.3㎡). Located near the Seoul High Court and other legal institutions in Seocho Legal Town, and close to the Gangnam business district, many legal professionals and corporate executives resided there. It is also known that Minister of Justice Han Dong-hoon owns an apartment in this complex.

In May last year, it passed the preliminary reconstruction safety inspection, and just a year later, Seocho District Office recently began the detailed safety inspection process. The results are expected to be announced by the end of October. If the detailed safety inspection is passed and reconstruction is confirmed, the Sampung Preparation Committee plans to apply for Seoul City's rapid integrated planning together with the preliminary trust company. The goal is to have the maintenance zone designated by the end of 2024.

Although trust-based reconstruction is gaining attention as an alternative to cooperative associations in the recent reconstruction market, Gangnam has traditionally had a strong preference for the cooperative association method. This is because the trust method charges a fee of 2-4% of the total pre-sale amount, and due to the high land prices in Gangnam, the fee burden is inevitably higher than in other areas. Moreover, compared to the cooperative association method, it is difficult to reflect the owners' opinions, so it was overlooked in Gangnam apartments where owners have strong influence.

However, recently, conflicts between cooperatives and construction companies over increased construction costs due to rising material prices have intensified, making negotiation power a crucial key to determining the speed of the project. Also, if a trust company undertakes the project, there is no need to establish a cooperative association, saving about four years in the early stages. As a result, following major reconstruction complexes in Yeouido-dong, Yeongdeungpo-gu, Mok-dong, Yangcheon-gu, and Sanggye-dong, Nowon-gu, it appears that more places in Gangnam are choosing the trust method.

Furthermore, the government recently announced a special measure that can shorten the project period by 2-3 years for trust-based reconstruction. Won Hee-ryong, Minister of Land, Infrastructure and Transport, said, "We plan to activate the trust method by granting special measures when trust companies implement maintenance projects," adding, "We will also prepare a standard project model for trust-implemented reconstruction."

Park Ki-seok, chairman of the Sampung Preparation Committee, said, "Ultimately, our goal is to complete the reconstruction project quickly, shortening the period by at least 6-7 years compared to other existing complexes, aiming for completion and move-in by 2030."

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