Following state-run rail operator KORAIL’s decision to quit the faltering Yongsan development project, investors and residents are moving to lodge compensation suits against the company or the project developer.
KORAIL, the largest shareholder of the project financing vehicle Dream Hub, resolved Monday to liquidate the massive redevelopment project, after its self-rescue plan had been rejected earlier by other private shareholders.
The greatest victims of the project fallout are the residents of Yongsan’s Seobuichon-dong, whose property rights have been restricted since 2010 for development.
Their residential area was excluded from the original development blueprint in 2007 but later incorporated upon the request of the Seoul Metropolitan Government.
Most households, while waiting for the prolonged project to develop, took large sums in loans to pay for their living expenses, sources said. The average sum per household is presumed to be over 300 million won.
“The responsibility is upon Seoul City, as it lured the residents with the development plans,” said an official of the resident representative council.
“We are also preparing to file a class action suit against the project-implementing company and its state-run shareholder KORAIL,” he said.
The official also warned that the aftermath could also lead to a second “Yongsan tragedy” as some desperate residents were seen to be contemplating extreme measures. The incident refers to a violent clash between the police and the victims of forced eviction in 2009, which resulted in the deaths of five protestors.
Private investor firms, too, are to suffer visible financial damages as they may no longer be able to retrieve their capital.
“We have reached a point of no compromise, and litigation seems to be the only solution to minimize the losses,” said an official of Samsung Construction & Trading, which invested 64 billion won as initial capital.
Despite the gloomy outlooks, the government refrained from interfering directly in the issue.
“The Yongsan project was initiated by the private sector and should the government interfere, the precedent will have negative effects in the future,” said Suh Seoung-hwan, minister of land, infrastructure and transport.
The ministry also demanded last week that KORAIL give up on the money-losing project but stressed that it had no intention to interfere any further.
The ambitious redevelopment project kicked off in 2007 but the project financing vehicle Dream Hub’s capital soon dried up, leading it to plunge into loan default last month.
KORAIL sought to carry forward the plan nevertheless by taking additional loans and scaling down the plan, but failed to reach a compromise with other investor firms.
By Bae Hyun-jung (firstname.lastname@example.org