Next month, as the selection of a construction company for the reconstruction of the Gaepo Woosung 7th apartment in the Irwon-dong area of Gangnam, Seoul, intensifying conflicts among construction companies are noted. A report prepared by Samsung C&T, indicating that it could lend project funds at a rate 2 percentage points lower than Daewoo E&C, has spread controversy.
In response, the head of the reconstruction association stated that it is not true that Samsung C&T offers to lend project funds at a lower interest rate than Daewoo E&C. The head also mentioned the controversy regarding the projected costs between Samsung C&T and Daewoo E&C, estimating the required project cost at 30 billion won for Samsung C&T and around 300 billion won for Daewoo E&C, while analyzing that approximately 400 billion won will be needed over four years. Additionally, since Daewoo E&C's project funding interest rate is 0.25 percentage points lower than that of Samsung C&T, if this amount is applied, the cost savings from choosing Daewoo E&C will emerge. The interest amount for 2.5% over 400 billion won for one year is 10 billion won, and for four years, it totals 40 billion won.
According to the maintenance industry on the 8th, an internal report prepared by Samsung C&T has become a topic of controversy among the members of the Gaepo Woosung 7th apartment reconstruction association. This apartment, located at 615 Irwon-dong in Gangnam District, consists of a maximum of 14 floors, 15 buildings, and 802 units, and last year, the Seoul City Planning Committee approved the plan to designate it as a 'reconstruction maintenance district.' The association has decided to reconstruct it into an apartment complex with a maximum height of 35 floors and 1,234 units, with Samsung C&T and Daewoo E&C competing to secure construction rights. The construction company will be decided at the association's general meeting on the 23rd of next month.
Samsung C&T compared and analyzed the main business conditions and product conditions with Daewoo E&C, stating in a report that it holds the advantage. This report compared 18 business conditions, including ▲ construction capability assessment ranking ▲ construction cost per 3.3 square meters ▲ additional relocation expense conditions ▲ timing of refund payments, among others, and 20 product conditions, including ▲ community area ▲ electric vehicle charging space ▲ viewable units ▲ ceiling-mounted air conditioning installation conditions.
In terms of business conditions, Samsung C&T was determined to be superior in 12 areas over Daewoo E&C, which was found to have the advantage in only 1 area. Further, regarding product conditions, Samsung C&T was superior in 14 areas, while Daewoo E&C had the advantage in 1 area. The report noted that determining which company has better conditions in the areas where it is difficult to conclude requires 'verification.'
According to the report, Samsung C&T proposed a construction cost of 8 million 689 thousand won per 3.3 square meters, which is 107 thousand won (1.2%) lower than Daewoo E&C's offer of 8 million 796 thousand won.
One of the most controversial parts of the report is the lending of project funds (including project promotion expenses). It details that Samsung C&T is providing additional relocation expenses to the members at an exceptionally low interest rate without limits, compared to Daewoo E&C. In reconstruction, project costs are divided into essential project costs and project promotion expenses. Essential project costs include operating expenses for the association and various service expenses, while project promotion expenses cover additional relocation expenses and return costs for lease deposits lent to the members. Due to the government's household loan management measures (the real estate measures from June 27), reconstruction members are also limited to 600 million won in relocation loans from banks. This has heightened interest in additional relocation expenses offered in the form of project promotion expenses.
The internal report states that Samsung C&T will lend additional relocation expenses and other project costs without limits, providing them at a funding interest rate associated with an AA+ credit rating. Daewoo E&C, on the other hand, is limited to 1 trillion won and will raise funds at a lower credit rating of A, with an interest rate 2.0 percentage points higher. According to a source in the maintenance industry, 'The proposals from both companies have not been disclosed to members yet as they were made prior to municipal approval, but some have leaked to the outside,' adding, 'There are also untrue parts, leading to ongoing controversy.'
In relation, Samsung C&T remarked, 'We are explaining the proposals to the members based on the association's official comparison chart and our proposal details,' noting, 'According to the association's publicity guidelines, there are no separate materials distributed to members.' They have stated that they have never made public the comparison documents that have caused the controversy with Daewoo E&C.
As the controversy grew, the head of the association also stepped in. Ma Jong-hyuk, head of the Gaepo Woosung 7th association, posted a message in the internal community on the 6th, asserting, 'It is not true that Daewoo is 2% more expensive,' adding, 'The average of the project funding interest rates for complexes recently won by Samsung is Certificate of Deposit (CD) + 2.5%, while Daewoo proposed CD + 0%.' He also noted, 'The cost savings attributed to the interest difference could be calculated by converting it into 400 billion won over four years.'
Meanwhile, regarding the scale of project costs for the reconstruction of this complex, there were significant differences between Samsung C&T and Daewoo E&C. Samsung C&T estimated it at 30 billion won, while Daewoo E&C estimated it to be over 300 billion won. The head of the association proposed that the project costs will amount to 400 billion won over four years and suggested analyzing the savings from securing these funds at an interest rate 2.5 percentage points lower than Samsung C&T. The annual interest on 2.5% for 400 billion won is 10 billion won, totaling 40 billion won over four years. Regarding the content of the message he wrote, the head explained that it was an analysis based on the project sites such as Banpo 3 district, Sinbanpo 3rd, and Jamsil Jinju apartments, which Samsung C&T had previously secured.
In the meantime, the association sent an official letter requesting both Samsung C&T and Daewoo E&C to refrain from defamation and the distribution of false information about each other.