[비즈한국] Samsung C&T028260, the top-ranked construction firm in terms of capacity, and Daewoo E&C047040, ranked 3rd, have clashed over the construction rights for the Gaepo Woosung 7th Apartment reconstruction project, often called the final puzzle of the Gaepo district in Gangnam, Seoul. It is the first time in five years that the two companies have competed for an urban renewal project since the Banpo Jugong Complex 1 (3rd zone) reconstruction project in Seocho-gu, Seoul. Samsung C&T is highlighting its financing capability based on rock-solid credit and a shorter construction period, while Daewoo E&C is heating up the competition by emphasizing its commitment to "guaranteed completion" and favorable interest rates for loans.
According to the urban renewal industry, Samsung C&T and Daewoo E&C participated in the bid for the Gaepo Woosung 7th reconstruction project, which closed on the 19th of last month. Both companies secured their place in the bidding war by submitting a deposit of 30 billion KRW by that date. Samsung C&T proposed "Raemian Lumione" as the complex name, while Daewoo E&C proposed "Summit Praniti." The last time the two companies squared off for a project was in May 2020 for the Banpo Jugong Complex 1 (3rd zone) project, where Samsung C&T defeated Daewoo E&C to win the contract.
The Gaepo Woosung 7th reconstruction project involves demolishing the existing 802-unit apartment complex located at 615 Ilwon-dong, Gangnam-gu, Seoul, and building a new 1,122-unit complex with up to 35 floors above ground. The site is considered highly profitable due to its proximity to Daecheong Station (Subway Line 3) and Daemosan Station (Suin-Bundang Line), as well as its low floor-area ratio of 157%. The Gaepo Woosung 7th reconstruction union plans to hold a general meeting of members on August 23 to select the contractor. The estimated construction cost is 677.9 billion KRW.
Samsung C&T holds the advantage in the proposed construction period and costs for Gaepo Woosung 7th. The construction period based on the actual groundbreaking date is 43 months for Samsung C&T, which is 4 months shorter than Daewoo E&C’s 47 months. Based on alternative designs, Samsung C&T's construction cost is 675.7 billion KRW (8.69 million KRW per 3.3㎡), which is approximately 2.1 billion KRW (110,000 KRW per 3.3㎡) cheaper than Daewoo E&C. The original estimated construction cost provided by the union was 677.9 billion KRW (8.8 million KRW per 3.3㎡), and both companies’ bids based on the original design match this estimate.
Samsung C&T is leveraging its financing capability backed by its formidable credit rating. Samsung C&T currently holds an AA+ rating from Korea Ratings and an AAA rating from the Korea Housing & Urban Guarantee Corporation, putting it more than a grade ahead of Daewoo E&C (A/Stable, AA). Utilizing this top-tier credit rating, Samsung C&T has proposed to provide business facilitation funds—including essential project costs, additional relocation expenses (over 100% LTV), and security deposit return costs—at the lowest possible interest rates with no limit. Daewoo E&C, in this bid, has limited additional relocation expenses to 50% LTV and capped business facilitation funds at 1 trillion KRW.
On the other hand, Daewoo E&C is countering with a commitment to "guaranteed completion." In this bid, Daewoo E&C submitted a formal guarantee for completion along with its proposal, whereas Samsung C&T did not. A guarantee for completion is a promise by the contractor to finish the work within the specified timeframe, barring force majeure. Typically, when project financing (PF) sites with insufficient credit or collateral secure loans, construction firms provide this as a credit enhancement. Recently, some renewal sites have begun demanding such guarantees due to concerns about construction halts caused by cost disputes.
Furthermore, Daewoo E&C is promoting its business loan interest rates and payment terms for member contributions. Daewoo E&C proposed a loan interest rate of CD rate + 0%, which is the lowest level in the industry. Meanwhile, Samsung C&T countered that it would use its top-tier credit rating to secure business funds at the lowest market rates through its own credit supply. Additionally, Daewoo E&C offered a benefit allowing members to defer the payment of their contributions for up to 6 years upon liquidation. The deferral period offered by Samsung C&T is up to 4 years, which is 2 years shorter than that of Daewoo E&C.
A key point to watch is the issue of construction cost adjustments due to inflation, a frequent source of disputes in recent renewal projects. In this bid, Samsung C&T proposed reflecting changes in the Construction Cost Index and Consumer Price Index up until the actual groundbreaking, while pledging to shoulder 10 billion KRW of any cost increases itself. Daewoo E&C proposed reflecting the lower of the two indices up until the groundbreaking, while deferring any increases for 18 months from the bid closing date. Both companies claim that these proposals could save the union approximately 36.4 billion KRW, or roughly 19 months' worth of construction cost inflation.
A union official stated, "As a prime Gangnam location right next to Daecheong Station with proven high business potential, we have successfully attracted a competition between major construction firms. We plan to hold the first joint information session for contractor selection on the 20th and a second joint session on the day of the general meeting to finalize the selection."