Table of Contents
- Signs of Business Crisis: The Largest Private Park Project in Haeundae is Shaken
- Business Structure and the Key Role of Samjeong Corporation
- Liquidity Crisis Triggered by the Banyan Tree Haeundae Fire
- Direct Impact of the Construction Suspension Order
- Chain Shock: Centum Samjeong Green Core Forest and Many Other Projects 'All Stop'
- Response of the City of Busan and Future Scenarios
- Conclusion and Implications
Signs of Business Crisis: The Largest Private Park Project in Haeundae is Shaken
The public park development project in Namjang Park of Banyeo-dong, Haeundae-gu, which was underway, has fully stopped as of March 31.
This action was taken following the court's decision on March 19 to commence corporate rehabilitation for the construction company, Samjeong Corporation.
This project, which has the largest area (approximately 720,000 m²) among private park special projects in Busan, has faced a crisis with the suspension, putting the development of the Centum Samjeong Green Core Forest, under the same group, at risk.
Future decisions regarding the continuation of this project are drawing attention.
Business Structure and the Key Role of Samjeong Corporation
The Namjang Park special project involves the purchase and development of park land by Jeongsang City Park, followed by the construction of residential buildings on a non-park area of 81,607 m² to generate profits.
Samjeong Corporation is responsible for construction, while the Busan Metropolitan City is in charge of approval and supervision, aiming for completion by the end of 2028. However, as Samjeong Corporation enters rehabilitation proceedings, concerns arise regarding the loss of financial capacity, revealing vulnerabilities in a structure that handles both implementation and construction simultaneously.
Liquidity Crisis Triggered by the Banyan Tree Haeundae Fire
On March 14 this year, a tragic incident occurred at the Banyan Tree Haeundae construction site in Busan that resulted in the deaths of six people.
The managing entity, Samjeong Corporation, is facing criticism for significant losses and safety management issues, prompting them to file for corporate rehabilitation in February due to financial pressures on the ongoing development projects.
Following the fire, financial institutions began considering loan recovery strategies, making funding challenging. This liquidity crisis led to the commencement of rehabilitation proceedings, ultimately resulting in the construction stoppage.
Direct Impact of the Construction Suspension Order
The city of Busan officially announced the construction halt on April 16 in accordance with the Environmental Impact Assessment Act. Along with this, they stated, “We will first carry out necessary measures through city funds after safety inspections, and will seek claims against Samjeong Corporation.”
The current completion rate is only 0.5%, and with logging and cutting operations ongoing, there are growing concerns about soil runoff during the rainy season. Nearby, a middle school is located, and the road is a children’s protection area, increasing public concerns.
Chain Shock: Centum Samjeong Green Core Forest and Many Other Projects 'All Stop'
Samjeong Corporation has been working on multiple projects, including the special project in Banyeo-dong, Haeundae. Examples include Centum Samjeong Green Core Forest, Seocho high-end officetel, Yongin station area development, and Changwon Gusan Marine Tourism Complex.
However, with the recent commencement of rehabilitation proceedings, the main creditors are struggling with the recovery of 110 billion won worth of PF loans. As a result, all sites have simultaneously halted.
The industry predicts that after the rehabilitation process of Centum Samjeong Green Core Forest concludes, a new construction company will need to be selected, along with restructuring. The future progression of this project is of great interest.
Response of the City of Busan and Future Scenarios
The city of Busan plans to first take emergency safety measures, including the installation of safety nets and the maintenance of sedimentation tanks. Subsequently, plans are being made to seek a new construction company in consultation with the court and related financial institutions.
If the rehabilitation plan is approved and capital restructuring occurs, Jeongsang City Park may continue the project, but the most crucial task will be to regain the trust of investors and reorganize the PF structure.
If the rehabilitation fails, there is a possibility that the cost of purchasing the park land may revert to the city of Busan, increasing risks for both public and private sectors.
Conclusion and Implications
The rehabilitation process of Samjeong Corporation is not merely an issue for one company; it has a significant impact on the entire development landscape of Busan.
If the Namjang Park special project and Centum Samjeong Green Core Forest do not progress properly, the schedule for housing supply in the Haeundae area may be delayed again, increasing market uncertainty.
Moreover, the importance of separating capital and construction in private special projects, as well as the need for disaster and financial risk management systems, is becoming increasingly vital.
The city of Busan must adopt two strategies to prioritize citizens' safety while maintaining the continuity of development.
Investors and buyers should carefully monitor the progress of the rehabilitation proceedings, the selection of a new construction company, and the flow of PF restructuring, thereby making efforts to mitigate risks.
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