AIG is speeding up the disposal of the International Finance Center (IFC) located in Yeouido. According to its contract with Seoul City, the five IFC buildings can be put up for sale from the first day of 2016. Although the disposal is totally legitimate, many are voicing concerns over a repetition of the Lone Star Scandal, as former Seoul City mayor Lee Myung-bak allowed too many business favors during the course of the IFC project in an attempt to turn Yeouido into a Northeast Asian financial hub.
The former mayor granted land for free during the construction of the IFC from 2006 to 2010. In addition, AIG was allowed to pay only 1 percent of the official land price from 2011 to 2017 before paying the rest starting in 2018. It is said that AIG’s small rent burden during the early stage led to a lack of effort to attract foreign financial institutions to the offices. At present, one of the three office buildings has a vacancy rate of over 70 percent.
Seoul City also allowed AIG to lease the land for 99 years before donating the buildings. This is regarded as another preferential treatment, in that Hyundai Motor Company has to pay at least 1.7 trillion won (US$1.4 billion) for its purchase of the Korea Electric Power Corporation (KEPCO) buildings and site in Samseong-dong, and the Lotte Group paid 510 billion won (US$430 million) while building the Lotte World Mall.
Such preferential treatments are especially problematic because the IFC failed in the end. “The contract between Seoul City and AIG is not too much, in fact, because similar cases abound with regards to large-scale projects in many other countries,” said Shim Kyo-eon, professor at the Department of Real Estate at Konkuk University, adding, “However, the special favors have to be retrieved by any means in this case, since the Korean government’s and Seoul City’s financial hub policy foundered after all.”