'Wangrofu' with over 750 unsold units, DK Asia's finances
We analyze the risks of 750 unsold units at Incheon Wanggil Station Royal Park City Prugio, the capital impairment of the developer DK First, and the sharp decline in revenue of its parent company, DK Asia.
'Wangrofu' with Over 750 Unsold Units Remaining Even After Completion
The unsold unit problem is serious for 'Wanggil Station Royal Park City Prugio' (hereinafter referred to as 'Wangrofu'), a resort-style apartment complex of 1,500 units supplied in Seo-gu, Incheon. Despite moving in starting in October 2023, the current number of unsold units is estimated to be at least 750. Considering that the occupancy rate of the complex was at the 40% level as of the end of 2024, even if all the reduction in unsold units in the entire Seo-gu area of Incheon were applied to this complex, more than half of the total volume still remains unsold.
Capital Impairment and Liquidity Crunch of Subsidiary DKFIRST
The financial structure of the developer, DKFIRST, is deteriorating. As of the end of 2024, DKFIRST is in a state of 'total capital impairment,' with liabilities exceeding assets by 83 billion KRW. Last year, DKFIRST's sales revenue was 211.4 billion KRW, but the value of its held housing inventory reaches 512.7 billion KRW. In particular, the scale of short-term borrowings to be repaid is approaching 400 billion KRW, leading to a liquidity crunch crisis. On February 27, DKFIRST signed a loan agreement worth 320 billion KRW with a syndicate of lenders, using the unsold units as collateral, but the maturity is February 2027.
Risk Spreading to Parent Company DK Asia
The crisis of the subsidiary is directly impacting the financial health of the parent company, DK Asia. DK Asia has lent approximately 169.3 billion KRW to its subsidiary, DKFIRST. As the subsidiary's unsold unit problem remains unresolved, the entire group is in a position of bearing the risk. In fact, DK Asia's revenue in 2024 was approximately 2.1 billion KRW, a 99.6% plunge compared to 2023 (approximately 527 billion KRW). Operating profit also turned from a surplus of 110.6 billion KRW in 2023 to an operating loss of 19.8 billion KRW in 2024.
Can Unsold Units Be Cleared Within the Loan Repayment Period?
Analysis suggests that it will be difficult to meet the loan repayment deadline at the current pace of clearing unsold units. Over the past year, the average monthly reduction in unsold units after completion in Seo-gu, Incheon, has been around 37 units. At this rate, it would take approximately two years to absorb all the unsold units of Wangrofu. Considering the loan maturity signed by DKFIRST, a sales speed more than twice as fast as the current rate is required. Accordingly, DK Asia is increasing marketing expenses to clear the unsold units, and the commission paid under selling and administrative expenses surged 121.7% from 3 billion KRW the previous year to 6.8 billion KRW in 2024.
