[비즈한국] Korea’s two largest construction firms, Samsung C&T028260 and Hyundai E&C000720, are facing off for the construction rights of the Hannam District 4 redevelopment project in Yongsan-gu, Seoul. With friction between unions and construction firms rising across many renovation sites recently due to construction cost hikes, both companies are focusing on highlighting how their proposals can reduce construction costs and increase profitability. Bizhankook obtained the comparative bid proposal table for the Hannam District 4 redevelopment project and analyzed the offerings of both firms.
According to the urban planning industry, Samsung C&T and Hyundai E&C participated in the bid for the Hannam District 4 redevelopment project, which closed on the 18th of last month. By that day, both companies had submitted their bid proposals along with a 50 billion won bid bond to the union, setting the stage for a contract battle. The complex name proposed by Samsung C&T is "Raemian Glow Hills Hannam," while the name put forward by Hyundai E&C is "The H Hangang." This marks the first time in 17 years since the Jeonggeum Village reconstruction in Dongjak-gu in 2007 that Samsung C&T and Hyundai E&C have competed for a redevelopment project's construction rights. At that time, Hyundai E&C secured the contract. The Hannam District 4 union plans to hold a general meeting on January 18, 2025, to select the contractor.
Currently, Samsung C&T leads Hyundai E&C in external evaluation metrics. In this year's construction capability evaluation for civil engineering and construction by the Ministry of Land, Infrastructure and Transport, Samsung C&T ranked 1st with an evaluation value of 31.8537 trillion won, while Hyundai E&C ranked 2nd with 17.9436 trillion won. The construction capability evaluation value represents the construction capacity a firm can handle at one time. In terms of credit ratings from Korea's three major credit rating agencies—Korea Investors Service, Korea Ratings, and NICE Investors Service (as of the bid date)—Samsung C&T also holds a two-step lead with 'AA+' compared to Hyundai E&C's 'AA-'.
Hyundai E&C holds the advantage regarding the proposed construction costs and construction timeline for Hannam District 4. The total construction cost proposed by Hyundai E&C is 1.4855 trillion won (8.88 million won per 3.3㎡), which is approximately 84 billion won (6%) cheaper than Samsung C&T's 1.5695 trillion won (9.38 million won per 3.3㎡). The estimated construction cost initially set by the Hannam District 4 union in its bid notice was 1.5724 trillion won (9.4 million won per 3.3㎡), which was higher than both companies' proposals. As for the construction period, Hyundai E&C proposed 49 months, outpacing Samsung C&T (57 months) by 8 months.
However, Samsung C&T has factors that could increase profitability. Samsung C&T stated it would bear up to 31.4 billion won of the construction cost increase resulting from inflation before construction begins. The company proposed starting construction in January 2028, three years after the selection of the contractor. Furthermore, Samsung C&T proposed increasing the total number of households in Hannam District 4 to 2,370, which is 29 more than the union’s original design. Samsung C&T estimates that assuming a presale price of 70 million won per 3.3㎡, this could generate an additional 33.9 billion won in sales revenue.
Hyundai E&C leads in interest rates for project financing loans. Hyundai E&C stated it would procure the entire project cost, including the bid bond, at the Certificate of Deposit (CD) rate plus 0.1%. Conversely, Samsung C&T proposed the bid bond interest at the CD rate minus 0.5%, but the remaining project costs at the CD rate plus 0.78%. While Samsung C&T is 0.6%p lower on the bid bond, Hyundai E&C has a 0.68%p advantage on the rest of the project costs. Hyundai E&C estimates that a 1% difference in interest rates results in a 42.5 billion won financial cost savings when borrowing 1.5 trillion won.
Samsung C&T is more favorable regarding the timing of contribution payments or refunds. Samsung C&T’s proposed timeline for contribution payments is up to 4 years after move-in, whereas Hyundai E&C’s is up to 1 year after move-in, a difference of about 3 years in the grace period. Both companies' contribution payments are based on consumer financing. In the case of refunds, Samsung C&T proposed paying 100% within 30 days after the completion of presale contracts, whereas Hyundai E&C proposed paying out refunds in installments: 50% upon general presale contracts, 30% during interim payments, and 10% upon final payment. Typically, general presales for redevelopment projects are conducted after member presales are completed.
The Hannam District 4 redevelopment project involves demolishing dilapidated and substandard buildings in the area of 360 Bogwang-dong, Yongsan-gu, Seoul, and constructing 51 apartment buildings (2,331 households) ranging from 7 basement levels to 22 floors above ground. The total construction cost is estimated at 1.5724 trillion won (9.4 million won per 3.3㎡), and the entire project cost, including various expenses, is expected to reach 2 trillion won. Among the four districts in Hannam New Town that have completed district designation, it is the only one that has not yet selected a contractor, and it is considered highly profitable due to the large number of units for general presale (approximately 800 households).
A Samsung C&T representative stated, "We have prepared the best conditions exclusively for Hannam District 4, which has both location and symbolic value. We will do our utmost to ensure that the only Raemian complex in Hannam becomes the best complex in the region."
A Hyundai E&C representative also conveyed, "Following 'The H Hangang' (Hannam District 3), we will create an 'The H' brand town of approximately 8,000 households and complete a landmark that will become the center of the Hangang River, beyond just Hannam New Town."