[비즈한국] It has been confirmed that Daewoo E&C047040 recently placed an attachment order on the land of the Uijeongbu Station Prugio The Central apartment complex, a redevelopment project in the Jungang Life Zone 3, Uijeongbu, Gyeonggi Province, which was completed last year. The move is intended to recover 17.1 billion KRW in unpaid construction costs, including late interest. Over the past year, this marks the third time Daewoo E&C has placed an attachment on a site where a project was already completed. These repeated attachment orders are interpreted as a combined result of unsold units in redevelopment sites due to the economic downturn and deteriorating cash flow for construction companies.
According to the urban maintenance industry, Daewoo E&C placed the attachment on the land owned by the Jungang Life Zone 3 Redevelopment Association for Uijeongbu Station Prugio The Central on the 2nd. This was to secure 17.1 billion KRW in unpaid construction costs including late payment interest. The Seoul Central District Court granted Daewoo E&C's application for attachment upon receiving a deposit insurance policy. It is confirmed that no primary lawsuit regarding the construction costs for this complex has been filed as of yet.
Uijeongbu Station Prugio The Central is an apartment complex redeveloped from the Jungang Life Zone 3 area in Uijeongbu, Gyeonggi Province. It was constructed by demolishing 84 dilapidated buildings (767 households) southeast of Uijeongbu Station on Subway Line 1 and building 9 structures (926 households) up to 35 stories high. Daewoo E&C was selected as the contractor in October 2011 and completed construction in August 2023. Aside from the units allocated to association members, 207 apartment units were sold to the general public in November 2020 with a 26-to-1 competition rate for first-priority applicants. Residents, including association members, began moving in last August.
The attachment of the site was triggered by the failure to pay construction costs. The Jungang Life Zone 3 Redevelopment Association was supposed to finalize the settlement of construction costs by November 4 of last year, the day after the move-in deadline, but it is reported that they were unable to make the payments on time due to unsold commercial units within the complex and delayed move-ins by some buyers. It is understood that the unpaid construction cost has decreased from approximately 35.2 billion KRW at the time to about 13.7 billion KRW currently. Of the 23 total units in the complex's commercial area, 18 are for general sale, and about 80% have yet to find buyers.
An official from the Jungang Life Zone 3 Redevelopment Association said, "From November 4 last year to the present, we have already paid over 200 million KRW in late interest alone due to the unpaid construction costs. The daily interest is around 3.5 million KRW," adding, "Since we cannot wait one or two years with the commercial units remaining unsold, association members are preparing for a general meeting to collect funds to pay the construction costs. Once the association applies for the transfer notice, there will be no way to intervene, so it seems the construction company attached the site to pressure the association."
This is not the first time Daewoo E&C has placed an attachment order on a completed redevelopment site. Previously, Daewoo E&C attached the site of the Hongje District 1 reconstruction project (Seodaemun Prugio Central Park) in Seodaemun-gu, Seoul, last November, and the commercial site of the Dachi-dong District 1 reconstruction project (Dachi Prugio Summit) in Gangnam-gu, Seoul, this May. These actions were taken to recover approximately 18.6 billion KRW and 17.8 billion KRW in construction costs, including late interest, respectively. The attachment on the Hongje District 1 site was lifted on the 25th of last month, and the attachment on the Dachi-dong District 1 site was lifted on the 5th.
Daewoo E&C's series of attachment orders appears to be related to its recently worsened cash flow. According to its half-year report, Daewoo E&C's operating cash flow for the first half of this year was -1.0779 trillion KRW, with the deficit expanding by 332.9 billion KRW (45%) compared to the same period last year. Operating cash flow refers to the cash generated from a company's business activities. A worsening figure means that the company is spending more than it earns from operations, indicating a tight financial situation. In the case of construction companies, a delay in collecting construction payments can lead to temporary deficits.
A Daewoo E&C official stated, "We attached the project site because the association did not pay the agreed-upon construction costs. The attachment is a minimum safety measure to preserve our claim for construction costs that remain unpaid despite having performed the work," adding, "There are cases where projects are halted or occupancy is disrupted due to construction cost disputes, but the company has faithfully completed the work based on the principle of good faith. The association must also keep its promise by collecting contributions and, if necessary, paying off the debt by selling off commercial units or other association assets."