A major property sale plan of Hanjin Group to raise own funding to meet state loan requirement for its flagship Korean Air Lines has hit a snag upon an development outline by the Seoul city government to turn the area into a public park.

Seoul Metropolitan Government said Thursday that it has requested the city development committee to transform the idle land in Songhyeon-dong owned by Hanjin Group into a public culture park. It plans to complete the designation process by August.

The idle land in Songhyeon-dong sits right next to Gyeongbok Palace, one of major cultural heritage tourism sites of Korea. The lot under ownership of Koran Air Lines, the country’s No. 1 full-service air carrier under transportation conglomerate Hanjin Group has been set aside for a seven-star hotel.

Earlier this year, the group placed the plot up for sale to improve liquidity of the airliner who has been mostly grounded by pandemic woes. The land is part of real estate assets that the group is seeking to sell to raise 2 trillion won ($1.6 billion) as a condition for a 1.2 trillion won relief aid for Korean Air Line from state lenders Korea Development Bank and Export-Import Bank of Korea.

On top of real estate asset sales, the carrier’s board recently approved a plan to issue 1 trillion won worth new shares. It has hired a consortium of Samjong KPMG and Samsung Securities as sales manager to sell real estate assets including plots of land worth 1 trillion won.

Since state lenders demand the airline to bolster its balance sheet by more than 1.5 trillion won, the sale of the land in Songhyeon-dong is crucial.

The company expected to get at least 500 billion won from the land sale with the market value estimated at maximum 800 billion won.

But locking the use of the land as a public park would significantly cut its monetary value, market analysts expect. If the Seoul government buys the land from Korean Air Lines, it would pay much less than what the company hopes to get.

Regarding the land sale, Hanjin Group Chairman Cho Won-tae is said to have told reporters that he cannot sell the land if it cannot get a fair value.

By Noh Hyun, Na Hyun-joon, and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]