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SEOUL-The master developer of New Songdo City has closed on a $1.5-billion financing. The funds will be used for land acquisition and infrastructure development. All told, the 10-year, $25-billion New Songdo City undertaking will include 125 million sf of new development on 1,500 acres in the city of Incheon, a western suburb of Seoul that sits on the Yellow Sea.Twenty-six financial institutions are participating in the syndicated financing, which was oversubscribed by some $3.5 billion. The three coordinating arrangers were ABN Amro, Kookmin Bank and Woori Bank. The rest of the group includes Kyobo Life Insurance and Korea Life Insurance and other major financial institutions such as the Industrial Bank of Korea and the National Agricultural Cooperative Federation. The developer of the international business district is New Songdo City Development LLC, a joint venture of Gale International and a subsidiary of Korean steel giant Posco. With the financing, NSCD has secured approximately 13% of the US$20 billion that is to be raised over the next 10 years. John Hynes, CEO of Gale International, tells GlobeSt.com that about $500 million of the loan proceeds will be used to acquire about 600 acres of the land for the development. The remainder will be used to for the development of a convention center, road and utilities, two international schools, a central park and other urban infrastructures. The convention center, which is projected to cost US$125 million, began construction in March 2005. New Songdo City will eventually include 50 million sf of office space, 30 million sf of residential space, 10 million sf of retail, five million sf of hotel space and 230 acres of public space. Hynes tells GlobeSt.com the financing means it no longer will need to sell lenders for the office, residential and retail components that the infrastructure to support those phases will indeed be built. “The successful land loan is a clear sign of major financial institutions’ belief in this project as being a sound and promising business venture,” he says. “The success of this financing also enhances the attractiveness of this project to international investors.” Hynes tells GlobeSt.com that Gale International completed its initial take on the master plan or the project three years ago and then spent a year refining it before submitting the package for formal review and comment by the South Korean government. Two years later, the permitting phase of the project is just 60 days away from being complete, he says.”With the loan and the permits in place, we are now capable of buying the land,” Hynes says. “The lenders haven’t committed to future funding rounds, but they have committed to the theory that if we accomplish all we set out to accomplish with this loan the office, residential and retail are going to be successful.”This is the art of the deal; by obtaining the infrastructure loan, we can now sell the other pieces of the development that will be revenue generators that will help us pay off the loan. They’ve lent us $1.5 billion with confidence that the other pieces of the puzzle will be installed and be successful.”Prior to landing the $1.5-billion land acquisition and improvement loan, the 2,145-unit first phase of 1st World, New Songdo City’s residential component, was pre-sold in just five days. When all phases are complete, the 1st World complex will include 12 buildings, including four 65-story towers, four 25-story towers and four low-rise buildings that will contain the live-work units.”If we didn’t sell those units, you have to wonder if we would have gotten this loan done,” Hynes tells GlobeSt.com. “The next project is the office space.”Hynes says he plans to break ground in January on three million sf of speculative office space. At a cost of $975 million, the four office towers represent the largest private commercial real estate investment in Asia, according to Gale International. The largest tower, the 1.25-million-sf, 65-story Asia Trade Tower, will be South Korea’s tallest building. Designed by Kohn Pederson Fox, the architect of New Songdo City’s master plan, Asia Trade Tower will stand 984 feet and consist of 22 floors of commercial office space, 14 floors of five-star hotel space and two floors of upscale flagship retail stores topped by serviced luxury residential units. It will cost $450 million to develop, according to Gale International. The second, third and fourth office towers will total 750,000 sf, 500,000 sf and 500,000 sf, respectively. The largest of the three will cost $225 million and the other two each will cost $150 million, according to Gale International. RFPs to design the structures were scheduled to go out this month. “There are $3 billion of individual projects that we anticipate starting in the next 12 months in addition to the $1.5-billion land acquisition and infrastructure loan,” Hynes tells GlobeSt.com. “It’s starting to get interesting; not profitable yet, but interesting.”

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