Exclusive
"Developing Distressed PF Site Directly," MG Community Credit Cooperative Federation Acquires Site for Yangyang Josun Hotel

[비즈한국] It has been confirmed that the MG Community Credit Cooperative (MGCCC) Federation has directly acquired the development site for the Josun Hotel in Yangyang, Gangwon Province, for 65.2 billion won, following a default on a project financing (PF) loan it had previously extended. The site had been intended for development after borrowing 84.5 billion won in the form of a bridge loan from the MGCCC Federation and local credit cooperatives; however, the project stalled before reaching the main PF stage. The land was put up for public auction in December 2024, but after six failed attempts to find a bidder, it was eventually sold through a private contract.

According to industry sources, the MGCCC Federation purchased the Josun Hotel development site, located in Ganghyeon-myeon, Yangyang-gun, Gangwon Province, via a private contract last November. The total purchase price was 65.2 billion won. The property covers a 9,087-square-meter area including five buildings, and is appraised at 105.2 billion won. The site was previously put up for public auction in December 2024, but the process was halted after six failed bids, leading to the private contract. The final minimum bid price at the last auction was equal to the final sale price.

The MGCCC Federation was the original lender for the Yangyang Josun Hotel PF project. In April 2022, a real estate developer, Company A, borrowed a total of 84.5 billion won in bridge loans from the MGCCC Federation and 45 local branches, including the Sokcho Central MG Community Credit Cooperative, to push forward with the hotel development. Josun Hotels & Resorts had planned to manage the hotel upon completion. While Company A initially planned to begin construction in 2023 following the permitting process, it is reported that the project collapsed without moving to the main PF stage.

Prior to the acquisition of the site, the MGCCC Federation and the local cooperatives sold their PF claims on the property to MCI Daebu in September 2024. MCI Daebu is a subsidiary of the MGCCC Federation, primarily engaged in purchasing and managing non-performing loans (NPLs). It mainly uses funds provided by the MGCCC Federation to acquire these distressed assets. MG Community Credit Cooperatives have been selling NPLs to MCI Daebu to lower delinquency rates and the ratio of substandard or below loans for individual branches. MCI Daebu’s loan and other receivables surged from 1.2185 trillion won in 2023 to 6.0215 trillion won in 2024.

The Yangyang Josun Hotel development site is expected to be developed into a welfare facility for MG Community Credit Cooperative members. The MGCCC Federation stated, "We acquired the site to enhance member welfare, as current welfare benefits available to our members are lower compared to other mutual finance cooperatives and mutual aid associations," adding, "We plan to review the construction of facilities that can provide differentiated cultural benefits to members and customers, and we also plan to find optimal ways to utilize the site to contribute to the local community and regions suffering from population extinction."

However, the asset soundness of the MG Community Credit Cooperatives remains a concern. According to the Ministry of the Interior and Safety, the delinquency rate for the 1,276 MG Community Credit Cooperatives nationwide was 8.37% in the first half of last year, a 1.56 percentage point increase compared to the end of 2024. The delinquency rate for corporate loans stood at 12.97%, while household loans were at 2.17%, indicating a relatively high volume of unrecovered corporate debt. The MGCCC Federation estimates that the delinquency rate may have dropped to the 5% range due to NPL sales in the fourth quarter of last year, but this level remains higher than the sub-1% delinquency rates seen at commercial banks.