[Exclusive] Lotte E&C Places Provisional Attachment on 'Sinbanpo Le-El' Apartments in Their Third Year Post-Completion

[비즈한국] It has been confirmed through Bizhankook's coverage that Lotte E&C recently placed a provisional attachment on the remaining apartment units held by the Sinbanpo 13th Reconstruction Association at Sinbanpo Le-El. Sinbanpo Le-El is an apartment complex in its third year of occupancy, rebuilt from the former Sinbanpo 13th complex. The association selected Lotte E&C as the contractor in September 2017 and completed the new apartment complex in June 2023. Lotte E&C filed a lawsuit last May, during the first year of occupancy, demanding additional construction costs. It appears the company urgently froze the association's remaining assets as the association moved toward liquidation following its dissolution meeting.

It has been confirmed through Bizhankook's coverage that Lotte E&C recently placed a provisional attachment on the remaining apartment units held by the Sinbanpo 13th Reconstruction Association at Sinbanpo Le-El. Photo = Courtesy of Lotte E&C

According to industry sources, Lotte E&C placed a provisional attachment on two units of the Sinbanpo Le-El apartment in Seocho-gu, Seoul, held by the Sinbanpo 13th Apartment Reconstruction Association, on the 2nd. The intent is to secure approximately 7.5 billion KRW of the roughly 11 billion KRW in outstanding construction costs. The Seoul Central District Court accepted Lotte E&C's application for provisional attachment on that day after receiving a collateral guarantee insurance policy. Lotte E&C had previously filed a lawsuit against the association last May, demanding payment for additional construction costs.

Sinbanpo Le-El is a reconstructed apartment complex entering its third year of occupancy. Reconstructed from the Sinbanpo 13th complex in Seocho-gu, Seoul, it was completed in June 2023, comprising three buildings (330 units) ranging from three basement levels to a maximum of 35 floors above ground. Lotte E&C was selected as the contractor for the reconstruction project in September 2017. The complex bears the company's premium brand, 'Le-El'. The first-priority subscription rate for the 98 general sale units of Sinbanpo Le-El in June 2020 reached an average of 114.3 to 1.

The provisionally attached units are the 'reserve units' held by the Sinbanpo 13th Apartment Reconstruction Association. Reserve units are portions of property that the project executor, the association, retains without selling them, to prepare for contingencies such as omissions in the list of eligible buyers or legal disputes during redevelopment or reconstruction projects. Usually, these can be secured within 1% of the total units. The association attempted to sell these reserve units—119㎡ (3.6 billion KRW) and 108㎡ (3.5 billion KRW) in size—in December 2023 and February of last year, respectively, but the tenders ended in failure due to a lack of bidders.

The Sinbanpo 13th Apartment Reconstruction Association is currently undergoing dissolution procedures. It held a general member meeting last May and resolved to dissolve. It is now awaiting liquidation procedures to finalize the dissolution of the legal entity by settling property and debt relations. For Lotte E&C, which claims the construction costs are unpaid, it appears they moved to attach the reserve units because the opportunity to recover the costs would disappear once the association clears its remaining assets and completes liquidation.

A Lotte E&C official explained, "We have been in litigation since last May regarding approximately 10 billion KRW in additional costs due to added construction work and cost increases. The association has finished the notice of ownership transfer and registration, and is currently in the final stages of liquidation. Therefore, we proceeded with the provisional attachment on the two reserve units." An association official only stated, "The contractor is demanding additional construction costs, and a lawsuit is currently underway."

Lotte E&C's outstanding construction receivables are on the rise. Construction receivables refer to money that a construction company has claimed from a client after completing work but has not yet received. Lotte E&C's uncollected construction costs rose from 1.4219 trillion KRW at the end of 2023 to 1.9323 trillion KRW at the end of last year, and further to 2.016 trillion KRW at the end of June this year. The allowance for bad debts, estimated by the company for funds unlikely to be recovered, increased from 187 billion KRW at the end of 2023 to 219.1 billion KRW at the end of last year, and 234.5 billion KRW at the end of June this year.