KORAMCO to Overhaul Gwacheon’s Old Downtown [fn Market Watch]

[Financial News] KORAMCO REITs Management and Trust will serve as the developer of an urban complex development project that will transform an aging commercial area immediately adjacent to Government Complex Gwacheon Station on Seoul Subway Line 4 into a mixed residential-commercial complex with approximately 590 housing units. Drawing on its experience pursuing Korea’s first trust-based redevelopment project and completing six sites, the company aims to take the first step in reshaping Gwacheon’s old downtown.
According to investment banking industry sources on the 9th, KORAMCO REITs Management and Trust signed a memorandum of understanding with the integrated preparatory committee for District 1 of the Government Complex Gwacheon Station urban complex development project to pursue the project under a private trust-based model.
The project site covers areas around Lots 1-13, 1-14, 1-17 and 1-18 in Byeoryang-dong, Gwacheon, Gyeonggi Province. The district spans 12,415 square meters. Under the current plan, a mixed-use complex with six basement levels and 40 floors above ground will be built, with a total gross floor area of approximately 156,300 square meters. It will include approximately 590 housing units and commercial facilities. Detailed architectural plans will be adjusted during the permitting process.
The area has strong locational potential, but redevelopment discussions repeatedly stalled because of aging buildings and complicated ownership rights. The enactment of the Urban Complex Development Act opened the way for private trust companies and real estate investment trusts (REITs) to participate as developers, creating room to structure the project differently. The trust-based model is also favored for redeveloping aging commercial areas because it can shorten the project timeline by eliminating the procedure for establishing an association.
KORAMCO will lead the entire process as the developer, including reviewing the project structure, developing a permitting strategy, analyzing feasibility, arranging financing and selecting a construction company. Unlike apartment reconstruction, commercial-area redevelopment requires coordination among stakeholders over issues such as compensation for tenants’ business operations and the splitting of ownership shares. As a result, the trust company’s ability to manage funds is expected to determine the project’s pace.
KORAMCO REITs Management and Trust is the first real estate trust company in Korea to pursue a trust-based redevelopment project and complete the first such project. It has demonstrated its execution capabilities by completing six redevelopment sites to date. Rather than focusing on increasing its order backlog, the company has maintained a strategy of selectively choosing sites based on their location, feasibility, residents’ consent and permitting prospects. This contrasts with some trust companies that have recently incurred losses due to risks related to guaranteed completion and delays in redevelopment projects.
The market is focusing on Gwacheon’s locational competitiveness. Gwacheon is a key residential area in the Seoul metropolitan region bordering the Gangnam area, while also serving as an administrative and business hub. As new residential belts have formed around Gwacheon Knowledge Information Town and Gwacheon Juam District, commercial areas in the old downtown have relatively fallen behind. If the area around Government Complex Gwacheon Station is transformed into a mixed residential-commercial complex, it is expected to help revive local commerce and expand daily-life infrastructure around the station.
Lee Chung-seong, CEO of KORAMCO REITs Management and Trust, said, "District 1 of Government Complex Gwacheon Station is a symbolic location that can renew the functions of Gwacheon’s old downtown. We will create a mixed-use development model that protects the rights and interests of existing landowners while balancing residential and commercial functions."
He added, "Rather than focusing on increasing the number of project sites, KORAMCO’s trust division’s principle is to selectively choose sites with strong actual feasibility and execution potential and complete them steadily."


[email protected] Kang Gu-gwi Reporter