HDC's contracts crumble after disaster in Gwangju
Hyundai Development Company (HDC) is struggling to keep its construction deals following a tragic apartment collapse in January.
A 39-story apartment in Gwangju, South Jeolla collapsed during construction in January, killing six workers. The construction was managed by HDC, and since then many people have been reluctant to move into HDC's apartments.
Since the accident, HDC has had its role greatly diminished in a redevelopment of a residential area in Gwangmyeong-dong, Gyeonggi that will eventually hold 4,400 apartments.
The project was being led by a consortium involving both HDC and Hyundai Engineering & Construction (E&C). But on Feb. 10, a committee in charge of the Gwangmyeong redevelopment project asked that HDC not participate in the construction and that the newly built apartments not use the name Ipark, an apartment brand of HDC. Instead they will use Hyundai E&C's brand name Hillstate.
Although both construction companies have Hyundai in their names, they are not affiliated. HDC was spun off from Hyundai Group in 1999 and is now under the HDC Group, which is the largest shareholder of the company with a 41.52 percent stake.
According to JoongAng Ilbo reports, HDC said it will “make sure the redevelopment project proceeds as the committee wants.” The committee texted its members — people who own the land that will be redeveloped — on Feb. 14 saying that Hyundai E&C will be the sole company in charge of the redevelopment.
The committee plans to formalize the decision at a meeting in April.
HDC will not participate in building the new apartments, but will get a share of the profits from the redevelopment thanks to its 43 percent stake in the consortium. Hyundai E&C owns the rest.
There have been cases in the past where companies in a redevelopment consortium didn’t participate in construction but divided the profits based on their stakes.
The redevelopment of The H Xii Gaepo apartments in Gangnam District, southern Seoul, was led by a consortium involving Hyundai E&C, GS Engineering & Construction and Hyundai Engineering. However, construction was only done by Hyundai E&C, GS E&C provided the brand name Xii and Hyundai Engineering invested in the consortium.
Another redevelopment project in Imun-dong, central Seoul, is also trying to squeeze out HDC.
The redevelopment is being led by a consortium involving HDC and GS E&C. Its redevelopment committee plans to hold a meeting of its members in April and decide whether to ask HDC to leave.
The project will build 4,321 apartments. Half of the buildings are supposed to be built by HDC and the other half by GS E&C.
BY HAM JONG-SUN, LEE TAE-HEE [firstname.lastname@example.org]