Successful 150 Billion KRW PF Loan for Dongdaemun Jegi 4 District... KB Securities as Lead Manager

Amid ongoing discussions about Taeyoung Construction's workout, project financing (PF) funding for the redevelopment project of Seoul Dongdaemun’s ‘Jegi 4 District’ has been successfully secured. Despite concerns over PF insolvency, the construction cost financing proceeded smoothly with joint guarantees from Hyundai Engineering & Construction, the top-tier construction company.

According to the investment banking (IB) industry on the 15th, the ‘Jegi 4 District Housing Redevelopment Maintenance Project Association’ recently selected KB Securities as the lead manager and raised 155.6 billion KRW in PF loans. The loan maturity is five years, and Hyundai Engineering & Construction, the contractor for the redevelopment area, provided joint guarantees for the PF. If the association fails to repay the PF loan on time, Hyundai Engineering & Construction will be jointly responsible for the repayment along with the association.

The association is reported to plan to use the raised funds for construction costs and other expenses related to the development of Jegi 4 District. The association will initially withdraw 43.1 billion KRW and plans to sequentially withdraw up to 155.6 billion KRW. Hyundai Engineering & Construction was selected as the contractor for this project after receiving support from 279 votes, accounting for 95.9% of the 291 association members.

The Jegi 4 District redevelopment project involves constructing 11 apartment buildings with 909 units and auxiliary facilities on a 33,485.7㎡ site located at 11 Hongneung-ro 15-gil, Dongdaemun-gu, Seoul (Jegi-dong). The site is subject to a building coverage ratio of 30.83% and a floor area ratio of 249.97%.

The project site is located in a station area approximately 600 meters from Cheongnyangni Station on Seoul Subway Line 1. In addition to Line 1, various lines such as the Gyeongui-Jungang Line, Bundang Line, Gangneung Line KTX, and Gyeongchun Line ITX are accessible. The area is also well-equipped with educational institutions like Hongpa Elementary School, Cheongnyang Middle School, and Kyunghee High School, as well as shopping and hospital infrastructure including Lotte Department Store, Lotte Mart, Homeplus, and Seoul Sungshin Hospital.

An IB industry official explained, "As this is a redevelopment project in a core area of Seoul with little concern about profitability, combined with joint guarantees from a top-tier contractor, the likelihood of issues arising in PF repayment is low."

Meanwhile, Jegi 4 District was designated as a maintenance area in 2005 and obtained management disposition approval in 2009. However, the project was effectively halted in 2013 when the association’s establishment was invalidated. Subsequently, the area was designated as a special architectural zone, some public land was transferred, and with increased floor area ratio and number of units, the project has rapidly gained momentum.

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