A 1.3 trillion won ($940 million) mixed-use development around Daejeon Station is on the verge of collapse after the Hanwha Engineering & Construction consortium leading the project failed to meet a repeatedly extended deadline for its land payment. The project, first planned in 2008, now looks likely to return to square one after drifting for about 18 years.
The consortium developing the Daejeon Station area mixed-use Zone 2-1 did not pay the remaining balance on its land purchase by the 6 p.m. deadline on the 19th, the Daejeon city government said. Of the total purchase price of 85.9 billion won, 900 million won remains unpaid. The payment deadline had been extended six times, but the final cutoff passed without settlement. The Korea Railroad Corporation, or Korail, which is implementing the project, plans to notify the consortium of the contract's termination on the 20th.
The project calls for a mixed-use complex on a 28,391-square-meter site near the east plaza of Daejeon Station, combining housing, a hotel and office, retail and cultural facilities. With total project costs of about 1.3 trillion won, it had been seen as a central effort to revive Daejeon's declining old downtown.
Progress was troubled from the start. A basic plan was drawn up in 2008, but three rounds of public bidding for a developer all fell through. Momentum appeared to build in 2020 when the Hanwha Engineering & Construction consortium was named preferred bidder, but the project stalled as a downturn in the construction market, surging building costs and higher project financing costs piled up.
Hanwha Engineering & Construction also sought changes to the development plan to make the project viable. At a residents' briefing last November, it proposed converting the planned hotel tower into a mixed-use residential building and raising the maximum height of the apartment tower to 72 floors from 69. On that basis, it said it would begin construction in February of this year. The target completion date, however, was pushed back two years from the original plan to 2031.
Those plans also failed to materialize. In April, Hanwha Engineering & Construction told the Daejeon city government that it needed to reassess the project's viability and change the groundbreaking date, citing higher raw material prices, oil prices and exchange rates along with the slump in the property market.
If the termination goes through, the Daejeon city government is expected to consider options such as scaling down the project and seeking a new private developer. Finding a successor is likely to prove difficult, however, as conditions have already been eased to improve returns, including a larger share of housing, while construction costs and financing burdens have risen.