Eight of the 14 complexes in the Mokdong New Town area of Yangcheon District, Seoul, are pursuing reconstruction through the trust method. As the trust method emerges as an alternative to the cooperative method in the reconstruction market, Mokdong is being evaluated as the largest concentration of trust-based reconstruction projects in the country.
According to the construction industry on June 23, complexes 1, 2, 5, 9, 10, 11, 13, and 14 in Mokdong have designated trust companies as their project implementers. Our Asset Trust is managing Complex 1, Hana Asset Trust is overseeing Complexes 2 and 5, Korea Asset Trust is in charge of Complexes 9 and 11, Korea Land Trust is handling Complex 10, Daishin Asset Trust is managing Complex 13, and KB Real Estate Trust is responsible for Complex 14. In contrast, Complexes 3, 4, 6, 7, 8, and 12 are maintaining the cooperative method.
The growing adoption of the trust method in Mokdong is attributed to expectations for faster project execution. The trust method allows for the designation of a trust company as the project implementer without the need for establishing a cooperative, enabling it to oversee the entire project from permits to construction company selection, sales, and settlement. It is also considered more efficient in terms of financing and decision-making compared to the cooperative method.
Interest in the trust method surged following the suspension of the Dunchon Jugong reconstruction project in Gangdong District, Seoul. Prolonged conflicts over construction costs between the cooperative and the construction company revealed limitations in the cooperative-centered project structure, highlighting the trust company's management approach as a viable alternative.
However, some analysts suggest that the initial financing benefits typically associated with the trust method may be limited in Mokdong. Many key initial procedures, such as safety inspections and maintenance planning, have already progressed significantly, reducing the initial financial burden. This implies that the reasons for choosing the trust method in Mokdong should be sought in project management, speed, and risk distribution rather than merely financing.
In fact, some complexes in Mokdong are already experiencing the speed advantages of the trust method. Complex 13 took about three weeks to secure landowner consent and announce the designation of the project implementer. KB Real Estate Trust, responsible for Complex 14, is currently undergoing integrated review. A representative from KB Real Estate Trust stated, "We submitted the integrated review at the end of May and are currently in discussions with relevant departments. We aim to complete the integrated review and select a construction company by the end of the year."
However, the trust method is not always faster than the cooperative method. The fastest progress in Mokdong is being made by Complex 6, which is using the cooperative method. Complex 6 was the first among the Mokdong reconstruction complexes to receive approval for cooperative establishment and has proactively passed the integrated review by the Seoul city government, beginning the process of selecting a construction company.
Some complexes that opted for the cooperative method believe there is less necessity for the trust method. Ji Sung-jin, chairman of the Mokdong Complex 7 cooperative, explained their choice, stating, "Given Mokdong's sufficient project viability and sales potential, we determined there was little reason to bear the hundreds of millions of won in trust fees."
Construction companies also recognize both the advantages and limitations of the trust method. A representative from one construction company noted, "The trust method has the advantage of a simpler decision-making structure and greater stability in construction cost payments," but added, "In cases of design changes or cost negotiations, decisions must go through the trust company, which can complicate the process."
Ultimately, the Mokdong reconstruction projects will serve as a test case for whether the trust method can establish itself as a new standard in domestic maintenance projects. With eight out of 14 complexes opting for the trust method, key variables such as project speed, fee burdens, decision-making efficiency, and negotiation power with construction companies are expected to determine success or failure.
Lee Tae-hee, a researcher at the Korea Construction Industry Institute, remarked, "While the trust method has been actively promoted in the reconstruction processes of aging complexes like Mokdong, it is still difficult to evaluate it as superior to the cooperative method in terms of outcomes. The Mokdong reconstruction will be an important test of the capabilities of trust companies."
* This article has been translated by AI.
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