A 1.3 trillion won development project aimed at constructing over 1,500 mixed-use buildings in Cheonan, South Chungcheong Province, is set to go to auction as the lender group faces a loss of benefits due to a default on financial loans.
According to the construction and investment banking industries on 4th, the 'Cheonan Northwest District Ssangyong-dong mixed-use project' (project name: Cheonan Ssangyong Station Central Tower), which is being promoted in Ssangyong-dong, Cheonan, faced a loss of benefits on May 16 after failing to repay the lender group's bridge loan (land acquisition stage loan) of 130 billion won.
Cheonan Ssangyong Station Central Tower received project plan approval from Cheonan City on January 24, 2022, to develop a mixed-use complex comprising five residential buildings with a total floor area of 2,494.48 square meters, a gross area of 376,272.86 square meters, 5 underground floors, and 69 stories with 1,498 households. The project implementer at that time was Ajetone, and it was proposed to be sold through a private sale. Furthermore, on April 6 of the same year, the project main body was transferred from Ajetone to KB Real Estate Trust through a project plan change approval.
The lender group, including Samsung Securities, first notified the implementer of the loss of benefits for the 130 billion won bridge loan. A lender group official noted, 'We plan to notify the occurrence of the EOD again and proceed with the auction process for the land used as collateral.' An investment banking official commented, 'There were several loan maturity extensions, but since interest payments were not properly made, I understand that the lender group processed the loss of benefits.' The project site is located near Ssangyong Station and Bongmyeong Station of Subway Line 1 and is adjacent to Emart Cheonan across a road.
Cheonan Ssangyong Station Central Tower is currently in a controversial state regarding the change of project plan approval received from the local government. Cheonan City approved the project plan, which aimed to supply mixed-use buildings through private sales, in 2022. The project has been stalled, and the implementer has determined that general sales are unlikely to be feasible due to the real estate market situation, and plans to change the supply method to rental housing. The maximum height is also planned to be reduced from 69 floors to 49 floors. Additionally, they are establishing a tenant preparation committee, a group of prospective tenants wishing to move in, to gather contract signers.
An official from the implementing company stated, 'The auction process is being carried out as part of the project, and we are currently progressing smoothly with processes such as bond purchases,' adding, 'We are conducting preliminary procedures such as architectural reviews to apply for project plan change approval.'
As the project plan has changed to rental housing and the tenant preparation committee is recruiting contract signers, Cheonan City is using press releases and banners warning of potential harm to contract signers. A Cheonan City official said, 'We are recruiting membership for a voluntary organization to promote rental housing, unlike the plans at the time of project plan approval,' and added, 'If the project is canceled or delayed, it could cause harm to the citizens, so we keep issuing related press releases.'
In a report titled 'Status Report on Recruitment of Corporations for Private Rental Housing Membership', Cheonan City stated, 'Since there are no legal protections for contract signers of the tenant committee, it is unclear whether investment funds can be recovered if the project is delayed or canceled, raising concerns about significant harm.'
However, an official from the implementing company remarked, 'The concerns raised by Cheonan City will not materialize,' noting, 'The landowners are directly participating in the implementing company, and this project has essentially secured all land, making it safer compared to other corporate private rental housing projects or cooperative housing projects.' They added, 'Raon Construction is scheduled to participate as the construction company, and the fund management is entrusted to Mugunghwa Trust, so the project is progressing more solidly than at the time of project approval in 2022.'
The National Assembly has recognized the issue that project implementers can arbitrarily change the approved project plan without the approval authority (local government) being able to cancel the approval. A group of 11 lawmakers, including Democratic Party member Moon Jin-seok, introduced a 'partial amendment to the Housing Act' which allows approval authorities to cancel project plan approvals if they discover that the approved project plan has been described differently or significant facts have been concealed or downplayed, resulting in concerns for prospective tenants.