Hanyang "Gwangju Jungang Park Project, Turning into a Second Baekhyeon-dong Incident... Gwangju City Must Take Action"

Hanyang vs Lotte Construction Battle for Project Leadership Intensifies
"Gwangju City's Inaction Undermines the Purpose of the Public Project"

The conflict between Hanyang and Lotte Construction, who are competing for control over the 'Central Park District 1 Private Park Special Project' to create the largest private park in Gwangju Metropolitan City, is expected to escalate. Hanyang claims that the project’s purpose has been undermined due to the inaction of Gwangju City, the supervisory authority and joint implementer, turning it into a second Baekhyeon-dong incident.

Perspective view of Gwangju Central Park District 1 Private Park Special Project / Image provided by Gwangju Metropolitan City

On the 5th, Hanyang, together with K&GS Steel, held a press briefing regarding unauthorized changes in the shareholder composition of Bitgoeul Central Park Development, the project implementer.

At the briefing, the main evidence was a written statement submitted to the court on the 16th of last month by Lotte Construction for the appeal trial of the 'injunction prohibiting name transfer' among K&GS Steel, SPC, Woobin Industry, and Lotte Construction.

Hanyang and K&GS Steel stated, "Through this statement, it was newly revealed that Lotte Construction’s acquisition of 49% of Woobin Industry’s SPC shares was a premeditated intentional default, and that on the 13th of last month, 19.5% of the 49% SPC shares were transferred to the financial manager, Hub Asset Management."

In the written statement, Lotte Construction said, "If the debtor (SPC) loses the lawsuit, it has communicated to the SPC that it will not agree to repay the additional 10 billion KRW loan under the first loan agreement of this case using the already executed project financing (PF) loan."

In other words, Hanyang argues that although the SPC secured sufficient funds through this PF, the 10 billion KRW default occurred because Lotte Construction did not consent to the fund withdrawal request.

Hanyang further added, "It appears that Lotte Construction transferred 19.5% of the SPC shares (49%) to Hub Asset Management to avoid various regulations under the Fair Trade Act, which require disclosure of major information such as internal transactions, cash flow, and share changes when owning more than 30% of issued shares and being included in a corporate group."

They continued, "It is a very serious situation that Lotte Construction and others, who did not participate in the initial project selection, are arbitrarily changing SPC shareholders multiple times and committing various illegal acts, shaking the foundation of the public offering system," urging Gwangju City to manage and supervise the matter.

It is pointed out that Gwangju City, which should oversee the project and mediate conflicts among stakeholders, is neglecting its role without taking any action.

They claimed, "Due to Gwangju City’s inaction regarding the unauthorized changes in the SPC’s shareholder composition, the purpose of the public offering project has been destroyed," and "it is turning into a second Baekhyeon-dong incident."

They added, "We have repeatedly requested Gwangju City to exercise its supervisory authority and waited for changes, but the city has consistently responded with silence and excuses," and "we will no longer wait and will immediately file a lawsuit against Gwangju City for illegal inaction." Separately, they also plan to sue Gwangju City for dereliction of duty and abuse of authority.

This project involves constructing park and non-park facilities over 2,435,027 square meters in the Geumho, Hwajeong, and Pungam neighborhoods of Seo-gu, Gwangju. On the non-park facility site, a residential complex with 39 buildings ranging from three basement floors to 28 above-ground floors, totaling 2,772 households, is planned. The housing construction project plan has been approved by Gwangju City, and the supervisor has been designated, bringing the project close to groundbreaking. The total project cost reaches 2.1 trillion KRW.

The SPC was formed in January 2020 with Hanyang (30%), Woobin Industry (25%), K&GS Steel (24%), and Park M (21%). Lotte Construction initially joined the project as a construction company, not an SPC shareholder. Despite a special agreement among shareholders including a clause for Hanyang to exercise voting rights to secure all non-park facility construction rights, Woobin Industry led the selection of Lotte Construction as the builder, sparking conflict.

In this process, Woobin Industry exercised shareholder rights by proxy over K&GS Steel’s 24% SPC shares. Last year, it exercised a call option on K&GS Steel’s shares to secure 49% ownership. Then, in October this year, Lotte Construction exercised a possessory lien to acquire Woobin Industry’s shares. As a result, the SPC shareholder composition was reorganized as Hanyang (30%), Lotte Construction (29.5%), Park M (21%), and Hub Asset Management (19.5%).

Hanyang criticized, "The project operator composition has drastically changed, but the bigger problem is that not once during the three shareholder changes did they obtain approval from Gwangju City," calling it "an unprecedented case in the history of public offering projects."

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