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Real Estate Investment and
Management (Lecture 1)
2007. 9.12
Prof. Byungho Oh
KDI School of Public Policy and Management
Contents
I. Real Estate as an Investment
II. Korean Real Estate Overview
What is Investment?
1. Investment Industry and Real Estate's Role
- Investor Objectives and Concerns
- Implications of Investor Heterogeneity
- The general structure of Investment Product and
Vehicles
2. Real Estate as an Asset Class
- Four Major Investment Asset Classes
- Historical Investment Performance
What is Investment ?
Investment is the act of putting
money aside that would be
used for current consumption
expenditure.
WHY DO PEOPLE INVEST?...
Individuals:
– THE 25-YR-OLD "YUPPY" ? . . .
– THE 25-YR-OLD "DINC" COUPLE ? . . .
– THE 35-YR-OLD "YOUNG FAMILY" ? . . .
– THE 45-YR-OLD "MID-LIFE CRISIS" ? . . .
– THE 65-YR-OLD "RETIREE" ? . . .
DIFFERENT LIFE STYLES, LIFE CYCLES,
PERSONAL GOALS, LEVELS OF WEALTH
WHY DO PEOPLE INVEST?...
Institutions:
– LIFE INSURANCE COMPANIES
– PENSION FUNDS
– MUTUAL FUNDS
– BANKS
– FOUNDATIONS
DIFFERENT CONSTITUENCIES, EXPERTISE,
LIABILITIES, REGULATIONS, SIZES
WHY DO PEOPLE INVEST?...
===> DIFFERENT TIME HORIZONS,
RISK TOLERANCES,
NEEDS FOR INCOME vs GROWTH
Therefore, . . . (implications for financial
services industry)
TWO MAJOR INVESTMENT
OBJECTIVES:
1) GROWTH (SAVINGS) -
RELATIVELY LONG-TERM
HORIZON (NO IMMEDIATE NEED);
2) INCOME (CURRENT CASH FLOW) --
SHORT-TERM & ON-GOING NEED
FOR CASH.
The investment objectives
⃗ growth(or savings) objectives:
- typical of young to middle-aged individuals, of
wealthy individuals of all ages, and institutions such
as pension funds of growing company
⃗ income (or current cash flow) objectives:
- retired individuals and institutions such as
endowment funds or pension funds with more retired
members than current contributors
MAJOR CONSTRAINTS &
CONCERNS:
- RISK
- LIQUIDITY
- TIME HORIZON
- MANAGEMENT BURDEN, EXPERTISE
- AMOUNT OF FUNDS AVAILABLE FOR
INVESTMENT (SIZE)
- CAPITAL CONSTRAINT
Therefore (again), . . . What?
The major constraints and concerns
⃗ Risk: the possibility that future investment
performance may vary over time in a manner
that in not entirely predictable at the time when
the investment is made
⃗ Liquidity: The ability to sell and buy investment
assets quickly at full value and without much
affecting the price of the assets.
⃗ Time Horizon: The future time over which the
investor's objectives. constraints and concerns
are relevant.
continued
The major constraints and concerns
⃗ Investor Expertise and Management Burden:
How much ability and desire the investor has
to manage the investment process and the
investment assets.
⃗ Size: How "big" the investor is in terms of the
amount of capital in need of investment
⃗ Capital constraint: Does the investor face an
absolute constraint on the amount of capital
they have available to invest, or can additional
capital be obtained relatively easily of good
investment opportunities are available?
UNDERLYING ASSETS vs INVESTMENT PRODUCTS
an Example from traditional corporate finance
The main point of the sys of investment product is to provide investor with
different risk and return objectives in the same underlying asset
Exhibit 7-2: A REAL ESTATE EXAMPLE of the
Investment System
Underl. Asset: "Bricks & Mortar" (e.g., Grump Family Shopping Centers)
(Priv.Traded) (Rent-producing Real Properties )
Private e.g., Ltd Partnerships Commercial Mortgages
Invest. (or CREFs, Priv.REITs, etc) Senior (debt) claims:
Products: Own equtiy in properties: Privately held & traded
LP Shares (units) privately held ("whole loans")
& privately traded if at all
Public REITs CMBS
Invest. ―UPREIT‖ Owns publicly traded
Products: LP Units, securities based
Issues publicly on a pool of mortgs
traded shares.
(May also directly own
Underl.Asset, or Mortgs
& CMBS)
Investors: Small & Large Small &
individual, Large Investors Large
institutional Investors (Wealthy Individuals, Developers, Institutions) Investors
Exhibit 7-3:
End of Year Public vs Private Asset Mkt Com m ercial R.E. Values:
(Indexes set to have Equal Avg Values 1974-98)
2.2
2.0
1.8
1.6
1.4
1.2
1.0
74 76 78 80 82 84 86 88 90 92 94 96 98 2000
NAREIT (Unlevered) NCREIF (Unsmoothed)
Real Estate as an Asset Class
Cash
Stocks
Bonds
Real Estate
Stereotypical characterization of Major Investment Asset Class
Investment Stocks Real Estate Long-term Cash(T-Bills)
Concern Bonds
Risk High Moderate to Moderate to Lowest
Low Low
Total Return High Moderate to Moderate Lowest
High
Current Yield Low to High High Moderate
Moderate
Growth High Low-High None None
Inflation Good Best Bad Bad
Protection
Exhibit 7-4: Approxim ate Aggregate Value of Asset
Classes, USA late 1990s ($Trillion)
2
8
Cash
11 Stocks
Bonds
Real Estate*
12
Exhibit 7-6: HISTORICAL PERFORMANCE OF MAJOR INVESTMENT
ASSET CLASSES, COMPARED TO INFLATION (CPI), 1969-2001
Value of $1 with Reinvestment: 1969-2001
$50
$45
Stocks $37.95
$40 LT Bond 16.42
Real Est 15.99
$35
TBills 7.68
$30
CPI 4.68
$25
$20
$15
$10
$5
$0
69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01
CPI TBill SP500 LGBond RE
First half of the period…
Value of $1 with Reinvestment: 1969-85
$7
Real Est 6.03
$6 Stocks 4.65
Bonds 3.58
TBills 3.35
$5 CPI 2.89
$4
$3
$2
$1
$0
69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85
CPI TBill SP500 LGBond RE
Second half of the period…
Value of $1 with Reinvestment: 1985-2001
$12
Stocks $8.17
$10
Bonds 4.59
Real Est 2.65
$8 Tbills 2.29
CPI 1.62
$6
$4
$2
$0
85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01
CPI TBill SP500 LGBond RE
Exh.7-9a: Avg.Ann.Total Return (1970-2001)
14%
12%
10%
8%
6%
4%
2%
0%
T Bills G Bonds Real Estate Stocks
Income Growth
Exh.7-9b: Annual Volatility (1970-2001)
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
T Bills G Bonds Real Estate Stocks
The Real Estate as an Investment
Investment Analysis
Investment Performance
Concept and Definition
From Greer and Kolbe, Chapter 1. “The
Real Estate Investment Decision”
State of the Investment
Analysis Art
Historically lagged behind mainstream
finance and investment thought; great
strides recently
Treats real estate as capital asset
desired for stream of benefits
– Real estate investment as special case of
modern capital budgeting
Real Estate as an Investment
Investors Passive or Active
– Active investors acquire direct title to real
property; either oversee property themselves or
hire management firms
– Passive investors place assets with professional
money managers who acquire interests in real
property; may acquire shares in corporations or
partnerships that hold real property interests;
make no operating decisions
Real Estate as an Investment
Investors take equity or debt position
– Distinction between investors in real assets
and investors in financial assets
– While both are investors, exclude
mortgage lenders from this study of
investment analysis and decision making
Figure 1.1 Real Estate Investments
Who Are the Investors?
Private investors
Institutions, such as REITs and pension funds
Small level of foreign holdings
– Concentrated in locales and types of properties
– Surged during early 1980s and later moderated
– Level shifts with foreign exchange rates
– Level impacted by relative interest rates
Figure 1.2 REIT
Real Estate Investment
Performance
Data for investment comparisons scarce, but
frequently concluded that real estate
generates returns roughly comparable to
common stock, with greater predictability of
returns
More data for investment return comparisons
available recently, but heavily influenced by
period from which data are drawn
Brueggeman, Chen and Thibodeau analysis--
real estate funds outperformed Standard’s
and Poor’s 500 stock index and Ibbotson
Associates bond index
Real Estate Investment
Performance
Giliberto compared REIT yields with Standard
and Poor’s 500 stock index, 1978 – 1989;
found advantage in common stocks
Zerbst and Cambon (1984) analyzed earlier
studies; found real estate tends to outperform
stocks during periods of inflation
Clayton and MacKinnon (2001) find REIT
returns now closely correspond to returns on
small capitalization stocks
Concepts and Definitions
Most Probable Selling Price—
Probabilistic estimate of the price at
which a future transaction will occur
Investment Value —Value of a property
as an investment to a present or
prospective owner
Concepts and Definitions
Transaction Investment value from the present
owner’s perspective sets the lower end of the range
of possible transaction prices. Investment value from
the perspective of the most likely buyer determines
the upper end of the range.
– To be motivated to sell, seller must conclude most
probable selling price is greater than investment value
– To be motivated to buy, buyer must conclude
investment value is greater than most probable selling
price
– For transaction to be possible, investment value from
prospective buyer’s point of view must be greater than
from the prospective seller’s point of view
Figure 1.3 Value Relationships
Figure 1.4
Figure 1.5
Estimating Investment Value:
An Overview
Investor who buys property buys set of assumptions
about ability of property to generate cash flows over
the expected holding period and likely market value
of property at end of proposed holding period.
Analysis:
– Estimate the stream of expected benefits
– Adjust for timing differences in expected streams of benefits
from investment alternatives
– Adjust for differences in perceived risk associated with
alternatives
– Rank alternatives according to relative desirability of the
perceived risk-return combinations they embody
Estimating Investment Value:
An Overview
Value of an investment property is sum
of the debt and equity positions
– Investment can be expressed as present
value of the equity position plus the
present value of debt position
Figure 1.6 Cash-Flow & Value
Figure 1.7
Investors Disagree on Investment
Values
Investors unlikely to arrive at same investment
value conclusions as they differ on:
– Future stream of rental revenue and operating
expenses
– Perceived levels of risks
– Willingness to defer immediate consumption in
interest of future benefits
– Desire for precisely determinable future
– Investors in higher-income brackets benefit more
from tax-deductible losses
Investor Objectives and Risk
– Seek financial return as reward for committing
resources and as compensation for bearing risk
– Emotional temperament plays a large role in an
investor’s attitude
– Relate expected return to risk; accept additional
perceived risk only if accompanied by additional
expected return
– Tend to become increasingly averse to additional
risk as total perceived risk increases
Real Estate Investment Climate in
Korean Real Estate Market
Real Estate Investment Climate in Korea
Demand - More diverse investors are entering the market.
(Indirect investment vehicles, pension funds)
Supply - Overall supply is limited. But redevelopment
projects may be good investment opportunities.
- REITs and Real Estate Funds have become active tool for commercial
real estate investors.
- National Pension Service started investing in real estate market.
(Office buildings and Development Projects)
- Redevelopment projects in Seoul offer more investment opportunities.
- Interest rates are showing an upward trend.
Economic & Investment Climate
Korea’s real estate market has been completely liberalized since market
opening in 1998.
– No regulations on the transfer of capital gains and discrimination against foreign
investors in terms of ownership and operation
– Proven high yield rate (6~8%) & High capital gains for foreign investors (at least
30~40%)
– Diverse deal structure for tax benefits (reduction of acquisition & registration tax
and retaining tax)
Seoul, Asia’s Most Preferred Investment Market (Source: BHPK, DTZ)
Score
Variables
Seoul HK Tokyo China Singapore
Political Stability 3 3 4 2 4
Capacity of Government 3 4 4 2 4
Regulatory Enviornment 3 4 4 1 4
Market Transparency 4 4 2 1 2
Liquidity (RE Market) 4 4 3 3 2
Currency Convertibility 4 4 3 1 4
Availability Products 4 2 3 3 2
Lease Structure 3 2 2 3 3
Total Score 28 27 25 16 25
Economic & Investment Climate
Seoul’s Importance in Korea
Seoul Metropolitan Area (SMA: Seoul, Kyonggi, & Incheon)
accounts for 48.5% of national population and 48% of GDP.
56.2% of corporations, 76% of listed companies, 91%
of HQ of top 100 companies, 56.4% of manufacturers,
83.2% of HQ of public enterprises, and 83.6% of
government organizations are located in SMA.
More than 95% of foreign investment is concentrated in
SMA.
Trend of Land & Housing Price
(%)
40
30 Soaring Land Price
(’86 AG, ’88 Olympic)
Introduction
20 of RE Fund
10
NPL Market
Formed
0
87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04E
-10 Adoption of Introduction
Anti-Speculation Measures of REITs
Economic
Crisis
-20
Land Price Increase Rate Housing Price Increase Rate
Economic & Investment Climate
Economic Recovery
Real estate has been most fast recovered and steady increased investment
Housing price increased most in 2001 to 2003 and office rent in 2000.
Comparison
End of End of End of End of End of End of End of End of
‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04
KOSPI (Stock) 390.3 524.7 984.5 526.4 666.0 699.8 801.1 873.1
3 –year Corporate
Bond Yield (Year- 24.3% 8.3% 9.9% 8.1% 7.1% 5.9% 5.6% 3.7%
end)
Land Price Index
100.0 86.4 88.4 89.1 90.4 99.1 102.5 106.2
(Nationwide)
Housing Price
100.0 87.6 90.6 91.0 100.0 116.4 127.4 124.7
Index (Nationwide)
Office Rent Index
100.0 86.1 91.5 103.1 106.2 108.4 110.8 112.1
(Seoul Prime)
Real Estate Investment Climate in Korea
Real Estate Investment Trusts (REITs)
Average Yield is around 10%, 2~3%p higher than initial projection
2002 2003 2004 2005 Total
No. of REITs 4 4 2 2 12
Property Type Office, Office Office Office, Retail
Residential,
MXD
Asset Value US$ 549.5 US$ 580.1 US$ 286.2 US$ 427.0 US$ 1,842.8
million million million million million
REITs Type CR-REITs CR-REITs CR-REITs CR-REITs, K-
REITs
80 30
70 72
– Real Estate Funds (REFs)
25
60 61
20
50
#. of Funds
Project Financing (PF)
US$ mil.
40 15
Type (75%) 30
20
30
10
Asset Operation Type
5
10
3
(25%) 0
Jun-04 Dec-04 Aug-05 Nov-05
0
Asset Size(US mil.) No. of Funds
Office Market: Stock & Market Size
Office buildings with 11 stories or more are 720 in Seoul.
And prime buildings are 95 in Seoul.
Total Office Stock in Korea (6 stories or more) (Unit: As of 2005, US$=1,000 KRW)
No. of Buildings GFA Capital Value
Nationwide 8,324 517 mill. SQF US $ 242 Bill.
Seoul 5,394 366 mill. SQF US $ 223 Bill.
% of Seoul 64.8% 70.5% 91.9%
(Source: Ministry of Construction and Transportation)
Large Office Stock in Seoul (11 stories or more) (Unit: mil. SQF)
CBD TBD YBD Others Total
No. Bldg 278 236 138 101 753
GFA 78.5 63.9 42.0 23.4 207.7
% 37.8% 30.8% 20.2% 11.2% 100%
Prime Office Stock in Seoul (International Grade A) (2005, Source: BHPK)
Grade A Grade B Prime (Grade A + Grade B)
CBD 15 25 40
TBD 17 19 36
YBD 9 10 19
Total 41 54 95
(Source: BHPK)
Office Market : Three Major Business Districts
Office buildings in the three major districts account for about 90% of the
total with 11 stories or more.
There are three major districts in the office market in Seoul.
CBD:
Central Business District
- Traditional Business
Core
CBD
TBD (also called GBD):
Tehran-road Business
District
YBD - Hub for Information-
TBD Technology Firms
YBD:
Yoido Business District
Major Securities Firms
- “Broadcasting Town”
Office Market: Investment Market
Domestic players are aggressive in the market. However,
foreign investors remain strong as well.
Amount of Investment for Office Buildings: Major Investors
- US$ 2.6 Billion (2004) Year Investor Type Major Investors
- US$ 2.2 Billion (2005) Goldman Sachs, Lendlease,
Lehman Brothers, Carlyle
Office Building Transactions (By Nationality) Opportunistic
1998-2000 Group,
Funds
(Unit:US$ bil ion) Morgan Stanley, Westbrook,
Lone Star
3.0
foreign Macquarie, Ascendas,
2.5 La Salle Inv., Pricoa,
domestic
2001-2003 Value-added GIC, Lendlease, Carlyle
2.0 Group,
Alpha Investment
1.5 MAPS, National Pension
Fund,
1.0 Core/ Pension Samsung Life Insurance,
Funds/ Koramco,
0.5 2004-
Domestic DEKA, Kyobo Life
Funds Insurance,
-
DBRE, Ascendas, GIC,
1998 1999 2000 2001 2002 2003 2004 2005
Pramerica, ING
Residential Market
Strongly Regulated Market by Government
Housing Price Doubled for the Recent 5 Years
– Increased floating money due to low interest rate
– Floating money has flowed into housing market the government’s anti-speculation policy
Apartment Price in Gangnam: US$ 6,655/sq.m (two-fold the price of prime
office space)
– The housing supply ratio in 2004 is 102% nationwide, 94% in SMA, and 89% in Seoul.
– Lack of land for residential development (Seoul plans to build 25 new towns via
redevelopment, 5 balanced development areas, Sewoon Plaza redevelopment area).
– The government aims to supply 500,000 units every year (about 5% of total housing stock).
High Price Growth Rate of Large Luxury Housing Units
– Large luxury housings for upper income citizens are not common (since the government plans
to supply small size housing units first to low-income citizens).
– Increased consumer preference for large luxury housing until recent revised Housing Act .
Residential Market
Housing Stock by Type
Housing Type (Nationwide)
100%
1.9 7.0
90%
13.5
80% 22.7
70%
37.5
60% 47.7
50%
92.6 87.5
40% 77.3
66.0
30%
47.1
20% 37.1
10%
0%
1975 1980 1985 1990 1995 2000
Single Family Apartment Townhouse Small Townhouse Etc.
Source: Korea National Statistical Office
Noticeably, the proportion of apartment in the housing stock has increased while that of
detached houses has been reduced across the nation.
Residential Market
Housing Size (Net Area Basis)
Housing Size (Nationwide)
100
90
80
70
60 Net: 63 ~ 96 ㎡ (19~29 py)
(%)
50
40
30
20
10
0
1975 1980 1985 1990 1995 2000
~46㎡(14py) ~63㎡(19py) ~96㎡(29py) ~129㎡(39py)
~162㎡(49py) ~228㎡(69py) 228㎡~
1py = 3.3058 sqm, 35.583 sq.ft Source: Korea National Statistical Office
The proportion of larger units is on a gradual increase along with rising
income and higher profits for private developers.
Korean Retail Market Retail Industry Overview
Sales
Store Corporate Department Store KRW 19.3 trillion
Discount Store KRW 17.5 trillion
Supermarket KRW 5.3 trillion
CVS KRW 2.7 trillion
Specialty
Open Market KRW 100.0 trillion
Non-Corporate
Neighborhood,
Retail community retail
Online Shopping KRW 2.6 trillion
Direct Marketing CATV KRW 4.2 trillion
Catalogue KRW 1.4 trillion
Non-Store
Direct Selling KRW 1.7 trillion
Direct Selling
Network Marketing KRW 1.9 trillion
Fastfood, Family Restaurant, Pizza, Coffee
Food Service KRW 5.0 trillion
Take-out, Catering Service
Retail Market: Market Volume & Major Player
Rapid growth of major retailers
Discount stores are expanding rapidly.
Rapid Growth of Market Share of Major Retailers expected to exceed 60% by 2010
100%
80%
60%
Korean Retail Market Size
40%
20%
(2005)
0% - US$ 180 billion Major 3
1991 1995 1998 2000 2002 2003 2004 2010E
Non-corporate Retailer Corporate Retailer
(Estimation) Market
Share 78%
Growth of Discount Stores (Annual Sales: expanding stores across the nation)
US$ Billion Department Store Store Annual Sales
30
Lotte 22 US$ 7.6 billion
25 Major 3
Hyundai 13 US$ 4.0 billion
20 Market
Shinsegae 7 US$ 2.2 billion Share 75%
15
Discount Store Annual Sales
10 Shinsegae 71 US$ 7.2 billion
5 Tesco 31 US$ 3.9 billion
0
Lotte 63 US$ 4.4 billion
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005E
Department Store Discount Store
Korean Retail Market: Major Foreign Investments
Discount Stores Seeking Investment
Actively seeking investors for the opening of new stores
(25~35 stores every year)
Un-levered yields estimated at around 8~10%
2001 Outlet (Investor: GIC RE)
TESCO (Investor: Local / International Investors)
Shopping Mall Development by Foreign Investors
AIG’s Destination Shopping Mall Project (99-year lease
on the land of Seoul City Government)
Y22’s Parc1 Shopping Mall Project (99 year lease on the
land of Unification Church)
Rodamco (Rodamco Plaza in Bucheon, SMA)
- 21 -
Korean Retail Market: Public Policy Issues
5-day Workweek
The commercial area in major office districts may see a slight drop in sales.
The so-called weekend commercial area in proximity to large apartment complexes, universities,
subway stations and major entertainment districts will see a rise in sales.
Retail Tenant Protection Act
A legal system designed to protect small retail tenants
Guaranteed deposit in the amount of KRW 240 million for Seoul, KRW 190 million for
overpopulation control area, KRW150 million for designated large cities except for Incheon and
KRW 140 million for other provinces
Ban more than 12% of rent increase a year. Allow the lease contract to be renewed for 5 years
This legal protection would spark more small start-ups.
Support for Small and Medium-Sized Distribution Companies
Expansion and improvement of logistical facilities
Expansion of financial support and tax benefits for distribution and logistics industry
Promotional Measures for Conventional Markets
Provision of various incentives by the government and local autonomous governments
Softening the regulations on FAR and redevelopment, simplification of urban planning procedures,
reduction of congestion levies, exemption of transfer and local taxes, expansion of financial support
Seoul Real Estate Market
Major Areas by Property Type
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4. Chamsil
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Jungdong Pundang
Pyongchon
Sanbon
region population # of Persons Persons
household per per
Dept. Dist.
store store
Seoul 10,331,244 3,570,228 356,250 240,261
Incheon 4,046,837 1,327,919 674,473 149,883
Gyeongg 8,967,424 2,993,647 560,464 151,990
i
Gangwo 1,087,115 369,254 1,087,115 362,372
n
Chungbu 952,721 313,112 476,361 136,103
k
Chungna 1,928,088 653,610 1,928,088 321,348
m
Daejeon 1,408,809 450,489 234,802 176,101
Gyeongb 2,153,231 722,617 717,744 239,248
uk
Daegu 2,539,587 815,709 507,917 158,724
Gyeongn 2,543,062 811,593 635,766 254,306
am
Busan 3,786,033 1,210,902 757,207 157,751
ulsan 1,060,378 331,502 265,095 132,547
Jeonbuk 1,604,791 514,543 802,396 229,256
Jeonnam 1,081,294 348,822 1,081,294 180,216
Gwangju 1,387,360 439,620 462,453 115,613
Jeju 369,627 122,712 369,627 184,814
Nationwi 48,289,173 16,080,992 492,747 198,721
de
Major redevelopment projects initiated by
Seoul Metropolitan Government (SMG)
Category No Project Name Area(ha)
1 Eunpyong 359.3
2 Gileum 95.0
3 Wangsimni 32.4
4 Gyonam 22.8
5 Hannam 110.7
6 Jeonnong 90.2
Mini Newtown 7 Jungwha 50.9
8 Mia 62.1
- Residential
Redevelopment 9 Gajwa 118.0
10 Ahhyun 115.7
11 Sinjeong 87.6
12 Bangwha 48.9
13 Youngdengpo 26.1
14 Noryangjin 76.4
15 Cheonho 41.3
A Cheongyangni 37.4
Balanced Infill
Development B Mia 47.9
Promotion Zone
C Hongje 18.8
- Commercial D Hapjeong 26.1
Redevelopment
E Garibong 27.8
Cheonggyecheon
Restoration F Community Redevelopment
Project
• With the groundbreaking of first newtown in June 2005, 25 newtown(10 newtowns will be designated soon) projects will be
completed by 2012. Total investment including public and private sector amount to US$ 25.4 billion.
• The five infill development promotion zones’ development will start in 2006 and 10 additional infill development promotion zones
will be designated by 2012.
Innovative cities (with the relocation of state
organizations) & Corporate Cities
Chungbuk (12 Organizations) Gangwon (13 Organizations)
• BT, IT & Communication, HR • Mining, Healthcare & Bio
development, Scientific technology, Tourism
technology
New Administrative City Wonju Corporate City
• 41 Organizations • Knowledge-based industry
Muju Corporate City Chungju Corporate City
• Tour & Leisure industry • Knowledge-based industry
Jeonbuk (13 Organizations) Gyeongbuk (13 Organizations)
• Land development, Agricultural • Transportation, Agricultural
industry, Food technology, Electric power
technology
Gwangju (3 Organizations) Daegu (12 Organizations)
• Electric power industry • Industrial promotion, Education &
academic development, Gas
Muan Corporate City
• Trade industry Wulsan (11 Organizations)
• Energy, Labor & welfare, Safety
Jeonnam (15 Organizations)
• IT & Communication, Busan (12 Organizations)
Agricultural indsutry, culture & • Maritime affairs & fisheries,
art Finance industry, Film industry
Cheju (9 Organizations)
• International business, Education Gyeongnam (12 Organizations)
& trainning, National tax
management • Housing construction, SME
promotion, National pension fund
