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Hanyang Academy Chairman Kim Chong-yang Provides Sunhwa Building as Collateral for Baeknam Tourism Loan

[비즈한국] It has been confirmed that Kim Chong-yang, Chairman of Hanyang Academy, provided his personal stake in the Sunhwa Building as collateral for a loan taken out by Baeknam Tourism last year. Hanyang Academy is the educational foundation that operates Hanyang University and counts Baeknam Tourism as an affiliate. Baeknam Tourism operates the President Hotel in Jung-gu, Seoul. Although its performance worsened during the COVID-19 pandemic, it has been improving since the endemic. However, rumors persist that Baeknam Tourism's financial situation remains precarious, with reports suggesting the company is considering the sale of the President Hotel. This stems from the deteriorating financial state of Hanyang Industrial Development, in which Baeknam Tourism holds a stake of over 30%.

The Sunhwa Building is a 17-story structure with two basement levels, completed in 1990. It is considered to have a favorable location near Seoul Subway Lines 1 and 2 (City Hall Station) and Line 5 (Seodaemun Station). In addition to numerous companies, the building houses the OPIc test center for foreign language speaking assessment. Hanyang Academy currently holds a 43.48% stake in the Sunhwa Building, while Chairman Kim Chong-yang owns 43.55% and Baek Kyung-soon, a Hanyang Academy board member (and Chairman Kim’s mother), holds 12.97%.

Bizhankook’s investigation reveals that the stakes held by Chairman Kim and board member Baek were provided as collateral last year. According to the real estate registry, a mortgage with a maximum bond amount of 48 billion won was established on the Sunhwa Building in May last year using the stakes held by Chairman Kim and board member Baek. Subsequently, an additional mortgage with a maximum bond amount of 75 billion won was set in December last year using the same stakes.

Notably, the debtor was Baeknam Tourism, not Chairman Kim or board member Baek. Chairman Kim and board member Baek provided their own assets as collateral to facilitate Baeknam Tourism’s borrowing. A mortgage allows a creditor to receive priority repayment over other creditors if the debtor fails to fulfill its obligations. Creditors typically set the maximum bond amount—usually 120% of the actual loan—to cover potential losses. This suggests that Baeknam Tourism received approximately 100 billion won in loans using the Sunhwa Building stakes provided by Chairman Kim and board member Baek.

Baeknam Tourism, a Hanyang Academy affiliate, is the entity that operates the President Hotel in Jung-gu, Seoul. The President Hotel is a 4-star hotel that opened in 1973. It is highly popular among tourists due to its proximity to major attractions such as Myeong-dong, Gyeongbokgung Palace, and Seoul City Hall.

In 2023, Baeknam Tourism recorded 19.8 billion won in revenue and 4.8 billion won in operating profit. However, it ultimately posted a net loss of 10.4 billion won. The reason for the net loss despite the operating profit was a significant equity method loss of 23.1 billion won, of which 23 billion won stemmed from Hanyang Industrial Development. As of the end of 2023, Baeknam Tourism held a 34.77% stake in Hanyang Industrial Development. Baeknam Tourism’s 2024 performance has not yet been disclosed.

It is interpreted that the poor management of Hanyang Industrial Development influenced Baeknam Tourism’s decision to use the Sunhwa Building as collateral for a loan last year. In fact, due to the fallout from Hanyang Industrial Development’s insolvency, Hanyang Academy is currently in the process of selling Hanyang Securities001750. Hanyang Academy signed a sale agreement with KCGI last September and is currently awaiting approval from financial authorities.

There are also rumors that Baeknam Tourism is considering selling the President Hotel. Most of Baeknam Tourism’s revenue comes from hotel room stays and food and beverage sales. If the President Hotel is sold, Baeknam Tourism’s performance is bound to plummet. Within the hotel industry, there is speculation that the potential sale of the President Hotel is also driven by Hanyang Industrial Development’s financial deterioration. If the rumors are true, Chairman Kim Chong-yang helped Baeknam Tourism secure loans by providing his personal assets as collateral last year, yet the company’s financial condition has not seen significant improvement.

For Hanyang Academy, Hanyang Industrial Development may hold more long-term value than Baeknam Tourism. Hanyang Industrial Development recorded 306.6 billion won in revenue and a 37.5 billion won operating loss in 2023. Although it suffered a loss, its scale of revenue is larger than that of Baeknam Tourism. Hanyang Industrial Development previously recorded solid performance, with 379.1 billion won in revenue and 8.1 billion won in operating profit in 2021, and 573.3 billion won in revenue and 1.9 billion won in operating profit in 2022. Improvement in performance could be expected if the construction market recovers.

While rumors surrounding Baeknam Tourism and Hanyang Academy abound, Baeknam Tourism remains silent. Bizhankook reached out to Baeknam Tourism to inquire about the reasons for the loans and the provision of the Sunhwa Building as collateral, but did not receive a response.