Courage essential as $40bn Korean project continues

New Songdo City is being billed as the largest private real-estate scheme in history – Korea's answer to Dubai, writes DAVID MCNEILL

TAKE A man-made island, roughly the size of the Phoenix Park. Fill it with state-of-the-art schools, hospitals, apartments, office buildings and high-end cultural amenities. Import architectural features from around the world, including New York’s Central Park and Venice’s canals, make English the lingua franca, and hang a sign at the gates that says: “Welcome: we will change the face of business.”

Attempting a mammoth project like that would be a risky venture at the best of times, let alone in the middle of Asia’s worst business slump since the second World War.

Putting it mostly in the hands of a single, largely untested US firm, and financing it with recycled real-estate profits sounds like an act of lunacy. Yet this is what is happening in South Korea, and strangest of all, it appears to be working.

Built on 1,500 acres of land reclaimed from the Yellow Sea off Incheon, about 55km (35 miles) from the South’s capital, Seoul, New Songdo City is billed as the largest private real-estate development in history – Korea’s answer to Shanghai and Dubai. Five years ago, it barely even existed on a map.

By 2015, when it is due for completion, Korea says this speck of strategically placed foggy flatland will be the world’s gateway to northeast Asia – a free economic zone with 80,000 apartments, 50 million sq ft of office space and 10 million sq ft of retail. This only scratches the shiny surface of Songdo’s ambition, however.

The city aims to do nothing less than banish the problems created by modern urban life. Asian business capitals, says the city’s publicity blurbs, are “racked” by environmental damage, undereducated workforces and a lack of available space.

“It would seem a city that enjoys clean air . . . and a superior quality of life just doesn’t exist any more.”

Songdo solves that problem by building from the ground up, providing “everything one could possibly want, need and dream of in a world-class city.”

So forget Asia’s choking metropolises – 40 per cent of Songdo is officially designated “green”, including the centrepiece 100-acre park. The city’s main car depot has been buried in a sunken courtyard to keep heat and emissions down.

A sleek new public transport system including underground trains linked to Seoul and a network of electric water taxis in the city’s salt-water canals will help make this one of the cleanest urban areas on the planet.

It all sounds too good to be true, and perhaps it is. But for now, New York-based real estate company Gale International, in (70-30) partnership with Korean steel-making and construction giant Posco, is having little trouble selling the dream.

Songdo’s first block of 2,600 apartments were oversubscribed by about eight to one when they went up for grabs in 2006. Another 1,000 will come onto the market this year and despite the sour economic data pouring out of Asia, Gale sees little difficulty in offloading them.

“Koreans believe in this project,” says British-born David G Moore of Gale’s project management team. “They view this an investment in the future.”

Others apparently agree: Sheraton is due to open a new 319-bedroom hotel on August 1st, golfing legend Jack Nicklaus is overseeing the construction of an 18-hole, 7,300 yard championship course, and in April this year, US tech multinational Cisco Systems signed a multi-billion dollar deal to provide network technologies to the new city.

Like most grandiose schemes, Songdo is suspended on a featherbed of confidence, and debt. Gale has gone billions into the red to build its state-of-the-art showcase.

The 65-floor Northeast Asia Trade Tower, which will be Korea’s tallest building when complete, has been refinanced, and main lender Shinhan Bank, in the words of one insider, “shuddered” when the global economic crisis hit Korea last year.

Rumours that the project could be in trouble, unable to secure loans from banks that have grown newly stingy, forced Incheon’s famously gung-ho Mayor Ahn Sang-soo on the defensive last month. “The current global economic crisis won’t deter us,” he said.

With global investors becoming more selective, Mayor Ahn and Gale believe Songdo will shine even brighter among the charred wreckage of failed real-estate ventures.“It’s different from any other project because we’ve maintained real quality,” says Moore. “That’s why people are still buying into it.”

Few doubt the quality. Most components of the city, from the 470,000 sq ft International School to Songdo’s $155 million (€114.70 million) Convention Center, which opened last October, are state of the art.

The school, affiliated to the prestigious US-based Milton Academy, has facilities to rival most universities, including a 650-seat theatre, swimming pool and a TV studio in the basement connected to the internet that will allow its young students to broadcast around the planet.

“They’ve spared nothing,” says the school’s head, Jorge Nelson. “It is probably the most advanced school in the world.”

Computers will be built into the houses, streets and offices as part of a “ubiquitous” network linking everyone in a sort of digital commune. Lead architect, US firm Kohn Pedersen Fox, calls it “the project of a lifetime”.

The firm’s head, James von Klemperer, told Architectural Record earlier this year that it boasted “everything. That includes culture, health, education, commerce, and recreation.”

After decades struggling in the shadows of giant neighbours Japan and China, Korea believes the world will now come to it.

“You know, by the middle of this century, this region will produce 40 per cent of the world’s GDP,” says Hee Yhon Song, chairman of the Asia Development Institute.

Song says South Korea’s central geographical position – Seoul is a two-hour flight from both Beijing and Tokyo – along with its size, mature economy and Western-educated elite, give it advantages few in the region can match. “I believe we are unique,” he says.

Still, many wonder whether the mostly privately financed project, variously estimated at $20-$40 billion, will continue to defy economic gravity.

An earlier blueprint crashed and burned after the 1997/8 financial crisis, before Incheon was reborn as a free economic zone in 2001.

The venture has the crucial backing of the state, which is underwriting the city’s infrastructure, including the high-speed rail system that will ferry people to and from Seoul, and the newly built (2001) Incheon International Airport. A 12.3km bridge linking the airport to Songdo is almost complete.

Incheon has sold off parcels of land at premium prices to Gale, Posco and other developers, attracting $9 billion in foreign investment since the first brick was laid in 2004, and perhaps four times that amount in promises.

The developers must keep shifting retail space and other real estate, or the whole process grinds to a halt. The first post-recession test comes this year when more apartments come up for sale.

Buying into the dream isn’t cheap. An average apartment costs $500,000, with some going for twice or three times that. Fees at the International School start at $25,000 a year. Even shopping at the 100,000 sq ft Taubaum Shopping Center will be out of the range of many ordinary Koreans, admit the developers.

The history of such purpose-built cities, like Brasilia, Islamabad and Canberra – as opposed to those that have grown organically – is not encouraging. Songdo risks becoming a sterile urban theme park, warn some observers.

“If you live in Manhattan, why would you want to live in a new town in Long Island or somewhere like that?” wonders Jongryn Mo, a professor at Seoul’s Yonsei University. But he believes that despite the worsening economy, Songdo will keep going.

“The government is in a big bind, and can’t pull out of the project. Once you start something this big it is unstoppable. Billions have been invested. If you stop at one-third, the money is lost and the people who are already there will be angry. You have to go all the way.”