Samsung C&T, the construction and trading arm of Samsung Group, said it is considering returning the right to build a landmark building in Yongsan to state-run rail operator KORAIL to join collective efforts to revive the faltering Yongsan property development project.
“The company is in internal discussions on whether to give up the construction right worth 1.4 trillion won ($1.2 billion) as KORAIL requested, which will make it possible for the railroad operator to restructure the Yongsan project,” a company official said.
KORAIL, the project’s largest financial investor with a 25 percent stake in developer Dream Hub, asked Samsung C&T to return the right to construct the landmark building, a highlight of the future international business district in central Seoul.
In its restructuring plan, which was revealed last week, KORAIL seeks to scale down and attract additional capital at home and abroad of up to 4 trillion won based on the new development plan.
Market analysts said the move would have little impact on Samsung C&T as the construction project was in the very beginning stage and Samsung C&T is competitive enough to win a similar high-rise building construction bid by KORAIL after restructuring the project.
Despite the return of its construction right, Samsung C&T will maintain its status as the fifth-largest financial investor in the Yongsan project with a 6.4 percent stake in Dream Hub.
KORAIL also promised to buy back convertible bonds worth 68.8 billion won that Samsung C&T issued to precede construction.
KORAIL is now able to take control of the beleaguered project, the largest property development project in Korea, amounting to 31 trillion won.
KORAIL appears to have successfully come to an agreement with investors to revive the project. However, to scale it down, the railroad operator has to make an agreement with residents living within the original development area.
The rail operator requested Seoul City government to hold a referendum for those residents on how to be compensated if their residential area is excluded from the development.
By Seo Jee-yeon (
jyseo@heraldcorp.com)
