The Songdo Global Town Phase 3 project has hit another snag after the Incheon Free Economic Zone Authority continued to press Incheon Global City Development (IGCD), a company it invested in, to suspend contractor selection for the development.
IGCD had already suffered delays of more than two months while Hoban Construction — the previously designated preferred negotiating partner — pursued an injunction to preserve its status. When Hoban withdrew that lawsuit, it appeared the project might finally get back on track, only for the authority's renewed demand to halt the selection process to create a fresh obstacle.
Particularly frustrating for IGCD is that the suspension demand threatens further delays at the very moment the company faces a payment of hundreds of billions of won in land balance fees by year-end. The company said it simply cannot follow the authority's logic — it cannot tell whether it is being told to proceed with the project or abandon it.
According to IGCD, the Incheon Free Economic Zone Authority sent an official letter on Tuesday reiterating its demand that the contractor selection process for Songdo Global Town Phase 3 be suspended — repeating a position it had already communicated the previous month.
The authority said a series of unexpected issues had arisen during Hoban Construction's lawsuit, a re-tender that ended without bids, and the apartment subscription-intention intake process. It said the selection work should therefore be paused until separate approval is granted, to prevent further confusion.
IGCD pushed back, saying the contractor selection process must resume immediately for the project to proceed normally.
In a letter sent to the authority on Thursday laying out the urgency of resuming contractor selection, IGCD noted that after Hoban Construction's preferred-partner status was revoked at the end of May, a fresh tender had been launched but ended without any bids.
The selection schedule has since been thrown further off course by the authority's suspension request.
Hoban Construction had filed an injunction with the Incheon District Court in early June seeking to preserve its status as preferred negotiating partner, but voluntarily withdrew the suit on Thursday after roughly two months.
IGCD said the injunction case was a separate legal matter from the contractor re-selection process, and that Hoban's withdrawal had removed the legal obstacle blocking the selection work.
Hoban Construction had been named preferred negotiating partner in February, but talks broke down over disagreements on a lump-sum contract structure, design change provisions and a clause excluding price-escalation adjustments.
The core issue now is the project schedule. Songdo Global Town Phase 3 — comprising 1,700 units — had received project plan approval with a target of breaking ground in August and completing construction in early 2030, with a construction period set at no more than 44 months.
With the contractor selection process stalled, even the ground-breaking date has become impossible to meet.
IGCD estimates that re-tendering and selecting a new preferred partner will take at least two to three additional months. If delays drag on, the company warned, a chain reaction could follow: rising construction costs, higher overall project expenses, eroding market confidence from repeated failed tenders and a postponed ground-breaking.
The financial pressure is also mounting. IGCD must pay a land balance of approximately 306 billion won ($221 million) by mid-December. The company said meeting this obligation requires contractor selection and a project financing close to happen on schedule.
IGCD is currently carrying roughly 1.5 billion won in fixed monthly costs, covering interest on the land payment and corporate operating expenses.
Any delay in the balance payment would trigger late-payment interest. Under the land sale agreement between IGCD and the authority, overdue amounts accrue interest at an annual rate of 7 to 10 percent depending on the length of the delay.
Based on the 306 billion won balance, a 7 percent annual rate would generate approximately 21.42 billion won in late-payment interest per year, or about 1.785 billion won per month. At 10 percent, the figures rise to roughly 30.6 billion won annually, or about 2.55 billion won per month.
Adding late-payment interest on top of the 1.5 billion won in fixed monthly costs would cause the financial burden from project delays to escalate sharply.
IGCD also warned that prolonged delays could disrupt plans to fund construction of Yeongjong International School — a roughly 150 billion won project tied to development proceeds — and jeopardize the planned March 2030 opening of a new elementary school tentatively named Ara 1 Elementary School.
Concerns about the project's public credibility are also growing. With apartment subscription-intention intake currently under way for overseas Koreans and foreign residents, IGCD said a prolonged delay in contractor selection could harm subscriber protection and damage confidence in the project.
IGCD has accordingly presented the authority with a concrete timeline: resume contractor selection immediately, refine the tender guidelines, issue a public tender notice, hold a site briefing, receive and evaluate bid proposals, and select a preferred negotiating partner by mid-September.
IGCD said it does not understand why the authority continues to demand a suspension even after Hoban Construction has already withdrawn its lawsuit.
The company said that if the authority insists on halting the process to prevent project confusion, it needs to clearly explain until when, and under what conditions, the contractor selection work will be allowed to resume.
IGCD said moving the project forward requires both contractor selection and a project financing close, and that a prolonged situation in which the core procedures are frozen while the obligation to pay hundreds of billions of won in land balance remains in place would amount to placing an excessive burden on the developer.
IGCD also said that if delays in contractor selection lead to higher construction and financing costs and trigger late-payment interest, the question of who bears responsibility could itself become a source of fresh dispute.
IGCD said that failing to resume contractor selection promptly would only compound the project's risks — higher construction costs, rising overall expenses, growing reluctance among bidders and a delayed ground-breaking.
Ultimately, Phase 3 of the Songdo Global Town project has reached a point where the authority's administrative judgment over the contractor selection process is in direct conflict with the developer's financial obligations.
Some observers say that if the authority intends to keep demanding a suspension, it must clearly state its specific reasons, the conditions under which the selection work will be allowed to restart, and its position on who should bear the costs arising from the delay.
With the legal obstacle removed by Hoban Construction's withdrawal of its injunction, some argue that rather than allowing the administrative vacuum to continue, the authority and IGCD should move quickly to find a solution — adjusting construction costs and tender conditions to prevent another failed bid and put the project back on track.
There are also concerns that if the contractor selection delay drags on and project costs, financing expenses and late-payment interest all surge, the fallout could extend beyond the project itself, putting the development management record of Incheon Mayor Park Chan-dae's newly launched administration under scrutiny as well.
"If we wrap up the tender within 45 days, settle the 306 billion won land balance in December, and then immediately obtain pre-sale approval and break ground, it will be financially beneficial for the authority too, and the project can proceed without further disruption," an IGCD official said. "To make that happen, we plan to proceed with the tender next week."
An official from the Incheon Free Economic Zone Authority said the authority had not received a formal instruction from the newly launched Incheon city government — which took office in July under the ninth round of local elections — to halt the contractor selection work, but that it was simply not moving forward given the change in administration. "As we stated in two official letters, we are suspending the contractor selection work until separate approval is given, out of concern over potential project confusion," the official said.
gilbert@heraldcorp.com
