[Editorial] End of a dream

What was supposed to be the nation’s largest-ever property development project is on the brink of falling apart as its executor has defaulted. All stakeholders will have to prepare themselves to contain the fallout from the potential bankruptcy of Dream Hub Financial Investment, the executor of the 31-trillion won project to develop an area in Yongsan, Seoul, into a huge complex of offices, shopping malls and apartments.

On Wednesday, Dream Hub defaulted on the payment of interest on its business loan ― 5.2 billion won on the 2.7 trillion won asset-backed commercial paper, whose maturity is due on June 12. Its fate will be sealed on the date. New life will be breathed into the moribund project if Dream Hub cobbles up a sum of money large enough to pay back the principal and interest. But its bankruptcy appears unavoidable, given that it missed the interest payment, which was relatively a small amount.

KORAIL, operator of the state-run railroads, initiated the property development project in 2006 to defray its 4.5 trillion won debt, much of which it had taken on for investments in high-speed rail projects. But it was blown into a 31-trillion won project the next year when then Seoul Mayor Oh Se-hoon included the site of a rolling stock workshop and a residential district for development as part of his vaunted “Han River Renaissance” project.

Should the project collapse, it would have a ripple effect. The first to be affected would be KORAIL and 29 private investors who participated in the formation of 1 billion won start-up capital. Some of them could be exposed to the risk of bankruptcy if their investments were written off as losses.

Among the most unfortunate would be the 2,200 families with homes in the residential district zoned for redevelopment, who have been barred from exercising their property rights. The Seoul metropolitan government has been banning property trades in the district in the name of speculation prevention for the past six years. As such, the average household has drawn 380 million won in loans by offering their homes as security.

Dispute settlement is no easy matter. The case is not only complicated but involves so many as potential litigants. Even so, the government will have to keep itself from being drawn into the case. It has no reason to spend any money from taxpayers on a private project that has gone awry.