Exclusive
Kolon House Vision, a 'Kolon Rental Housing Developer,' Files for Construction Business Closure

[비즈한국] It has been confirmed that Kolon House Vision, a wholly-owned subsidiary of Kolon Global003070, recently filed for the closure of its construction business after receiving a suspension of operations for its building construction business due to a capital shortfall. Since its establishment in 2016 for the purpose of developing and operating rental housing, Kolon House Vision has participated in the supply of approximately 1,500 rental housing units. However, after recording net losses for nine consecutive years since its founding, the company fell into a state of complete capital impairment by the end of last year, with liabilities exceeding its capital.

Kolon House Vision, a wholly-owned subsidiary of Kolon Global, filed for the closure of its building construction business on the 13th. The reason stated by the company for the closure is a "change to a business category other than construction." Previously, on the 1st and 14th of last month, Kolon House Vision received a 5-month business suspension order for the respective sectors from Hwaseong City, Gyeonggi Province, where its headquarters is located, because its capital fell short of the 150 million KRW required for indoor construction and the 350 million KRW required for building construction. With this filing for the closure of its building construction business, the only construction license remaining for Kolon House Vision is for the indoor construction business, which is currently under suspension.

Kolon House Vision is a real estate developer under Kolon Global. Since its establishment in 2016, it has been engaged in the business of developing and operating rental housing. To date, it has participated in the supply of approximately 1,500 rental housing units, including the Treehouse private rental housing in Yeoksam-dong, Gangnam-gu, Seoul; private rental housing in Sindorim-dong, Guro-gu, Seoul; and the 1st and 5th phases of Gyeonggi Happy Housing. Its building construction performance, as confirmed in the Ministry of Land, Infrastructure and Transport's construction capability assessment last year, was 16.9 billion KRW. Kolon Global, the 19th largest construction company in terms of construction capability, holds a 100% stake in Kolon House Vision.

Kolon House Vision has recently fallen into complete capital impairment due to sluggish business performance. According to its audit report, as of the end of last year, Kolon House Vision's total capital was -800 million KRW, marking its first negative figure since the company's inception. The company’s financial condition deteriorated as it recorded net losses for nine consecutive years from its first year in 2016 until last year. Last year, the net loss amounted to 3.9 billion KRW, a decrease of approximately 3.3 billion KRW (46%) compared to the previous year. Its parent company, Kolon Global, injected 6 billion KRW into the company through a paid-in capital increase in the first quarter of this year.

Kolon Global is also struggling with poor performance due to the downturn in the construction industry. While its consolidated revenue increased by approximately 10% from 2.645 trillion KRW in 2023 to 2.912 trillion KRW last year, its operating profit turned from a 7.6 billion KRW profit in 2023 to a 56.7 billion KRW loss last year. Kolon Global secured cash liquidity by disposing of tangible assets, such as selling the Sporex building and site in Seocho-dong, Seocho-gu, Seoul, to its affiliate Kolon Industries120110 last year. As a result, its net profit turned positive at 22.5 billion KRW last year, and its debt ratio improved by approximately 8% to 356%.

A Kolon Global official stated, "We carried out a reorganization of our subsidiary's business so that Kolon House Vision can focus on strengthening its development and rental operation capabilities, while transferring its existing construction and implementation expertise to Kolon E&C. By returning its existing construction license, Kolon House Vision plans to reduce direct and indirect costs while contributing to construction capabilities by transferring technical personnel to Kolon E&C." The official added, "Since obtaining its construction license, Kolon House Vision has carried out the Gangneung Gyodong Apartment project in collaboration with its parent company, Kolon Global, and successfully completed it in December of last year, thereby securing not only real estate development and operation capabilities but also construction execution expertise. We expect a synergy effect through collaboration with our modular technology development subsidiary, Kolon E&C."

Due to the worsening financial condition of companies caused by the economic downturn, an increasing number of construction firms are failing to meet the standards for construction business registration. According to an analysis of data from the Ministry of Land, Infrastructure and Transport's Construction Industry Knowledge Information System by BizHankook, 1,308 construction companies (including changes, corrections, and withdrawals) received business suspension orders this year (as of the 17th) for failing to meet registration standards, an increase of 16% (182 cases) compared to the same period last year. Those who wish to register for the construction business must satisfy the registration standards set by the Framework Act on the Construction Industry, including capital, personnel, and equipment. If a failure to meet these standards is discovered after registration, the construction business registration can be revoked, or the company may be subject to a business suspension of up to one year.