POSCO E&C "Responsible for Procuring 1 Trillion Won for Yeouido Hanyang Reconstruction Project"

POSCO E&C has proposed financial terms that minimize the owners' burden in its bid for the reconstruction project of Hanyang Apartment, the first redevelopment site in Yeouido, Seoul.

Perspective view of the Yeouido Hanyang Apartment reconstruction proposed by POSCO E&C / Image courtesy of POSCO E&C

On the 27th, POSCO E&C announced that although the Hanyang Apartment reconstruction project is a trust-type project that does not require financial proposals from the contractor, it plans to take full responsibility for raising the total project cost of 1 trillion won, thereby minimizing the owners' financial burden.

This project involves demolishing the existing 588 households in the area of 42 Yeouido-dong, Yeongdeungpo-gu, Seoul, and constructing up to 56-story buildings consisting of 5 towers with 956 apartments and 210 officetels, transforming the area into a complex supporting the functions of an international financial center.

POSCO E&C plans to take full responsibility for raising 1 trillion won, approximately 142% of the construction cost of 702 billion won proposed to the association. Since redevelopment projects sometimes face early exhaustion of project cost limits during the process, POSCO E&C aims to ensure stable project progress through responsible financing.

They also proposed progress payments from sales revenue. In trust-type projects, contractors receive construction costs through progress payments, which means the contractor is paid monthly by the developer for costs incurred during construction. If the developer lacks the capacity to pay construction costs, the trust account must be used. The interest rate on trust accounts has recently exceeded 6%.

Therefore, POSCO E&C declared that it will not receive construction costs unless there is sales revenue, preventing the developer from incurring expensive interest on the trust account. This eliminates the owners' financial burden related to financing costs.

Additionally, POSCO E&C proposed a project cost priority repayment condition, stating that even if income is generated, construction costs will not be received until the developer fully repays the previously borrowed project funds. Typically, contractors propose priority repayment of construction costs, which can increase the developer's interest expenses on project loans.

However, POSCO E&C’s proposal prioritizes repayment of project funds rather than construction costs, allowing the developer to reduce financing costs for the project. This directly leads to a reduction in owners' contributions. Furthermore, they promised to provide refunds to owners at each sales revenue milestone, including down payments, interim payments, and final payments.

A POSCO E&C official said, "We participated in the bid with financial terms that minimize the owners' burden as much as possible," adding, "We will devote all of the company's capabilities to the first Yeouido reconstruction project, Hanyang Apartment."

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