Huge Yongsan project is abandoned

The Seoul Metropolitan Government said yesterday that it has scrapped plans for a 31 trillion won ($27.3 billion) Yongsan International Business District. Shareholders in the mega-project have faced trouble in funding the construction.

The decision came five months after the Korea Railroad Corporation (Korail), the state-run railway operator and largest shareholder of the development plan, said it was pulling out, citing a lack of funding.

“A combination of the economic downturn, the project operators’ inability to secure funds and Korail’s decision all contributed to the collapse of the project,” a city official said in a statement.

The official end of the project came yesterday after Korail returned 1.2 trillion won to the project manager, Dream Hub Financial Investment. Korail earned the money by selling the land to the financial company.

On March 14, Dream Hub defaulted on 5.2 billion won worth of interest on the 200 billion won of asset-backed commercial paper, casting cloud over the project that was initiated in 2007.

The Yongsan International Business District was to rise on a 3,000-hectare (7,413-acre) site along the Han River in Seoul. The largest development project in Korean history, the new business district was supposed to be situated just outside the city center near Yongsan Station and be the home of large commercial complexes.

The end of the project is a huge blow to local construction companies, which stand to lose 200 billion won worth of investments in the project.

Samsung C&T, the nation’s second-largest construction firm, stands to lose the most after investing 64 billion won. Korea’s fourth-largest builder, GS Engineering and Construction, will be out 20 billion won, as will Hyundai Development Company and Kumho Industrial.

BY PARK EUN-JEE [ejpark@joongang.co.kr]