THE Pacific : S. Korean Construction Firm Is Building a Big Reputation in California
On the top floor of the Intercontinental Hotel overlooking Olympic Park, S. Joon Kim sipped white wine at lunch in one of the private dining rooms. Tired of traveling, he was considering whether to accept an invitation to Armand Hammer’s recent 91st birthday party at the Beverly Hilton.
Kim’s job as president of Ssangyong Construction takes him around the world no less than a 110 days a year. At 36, he heads one of the first Korean construction companies to move into the United States. His firm has developed three projects in California: Residence Inns in Anaheim and San Diego and Bayview Plaza Shopping Center in San Francisco.
“We are reviewing several more projects in California as equity investments,” Kim said during a recent interview. “But we are not at a stage that we can talk about them.”
Under a recent liberalization of foreign investment rules, South Korean companies are now allowed to make investments of up to $5 million in foreign real estate without prior government approval. The South Korean government had planned similar liberalization for individual investment but on May 31 revoked the new rules because of softness in the Korean economy. The change, however, is not expected to affect investments by Korean companies.
Ssangyong Construction is part of Ssangyong Group, headed by Kim’s older brother, Suk Won Kim. The parent company, which has $6 billion in annual sales, ranks sixth among Korea’s giant family-owned conglomerates known as chaebols in Korean, according to the younger Kim.
The elder brother has been chairman of Ssangyong Group since their father, who founded Ssangyong, died suddenly in 1975. Ssangyong, which means twin dragons, grew out of a small soap factory set up in 1939 by the Kims’ father. In 1987, the Ssangyong Group ranked 151st among Fortune magazine’s top 500 international companies.
Today, the diversified company is in a variety of businesses, including cement, trading, oil refining, construction and engineering, securities, heavy machinery, electronics, insurance, computers and shipping. Three years ago, Ssangyong acquired Dong-A Motor Co, becoming Korea’s fourth licensed auto maker.
Ssangyong Construction was formed in 1954 to help in the reconstruction of postwar Korea. Twenty years later it went abroad, focusing first on major commercial projects in the Mideast and then in Southeast Asia in the early 1980s. It was the general contractor for the $400-million Raffles City Complex in Singapore, which was designed by I. M. Pei and includes the world’s tallest hotel, the Westin Stamford Hotel.
‘Shrinking’ Construction Market
However, Ssangyong’s overseas projects have shrunk to 30% of its overall business from 70% three years ago. After peaking in 1982 at $14 billion, overseas contracts totaled $1.6 billion in 1988, according to Kim.
“The overseas construction market worldwide is shrinking,” explained Kim. However, Ssangyong is continuing to find development work in California. Kim said California is attractive because it is a growing state. Other desirable U.S. locations are New York, Washington and New Jersey, he said.
Ssangyong plans equity investments as both developer and contractor. “We are interested in commercial and residential projects if they are good projects. We don’t have strict rules that we can only participate in this kind of job or that kind of job.”
Although Ssangyong can afford to take a 100% position in a project, Kim says he prefers to take on partners in joint ventures. “We enjoy less profit (with a partner), but less risk, too. Not all Koreans think the same way. My point of view is from a medium- to long-term perspective.”
Lost Interest in Hotel
Ssangyong has a 70% equity interest in each of the Residence Inns in Anaheim and San Diego, which are both managed by Marriott. The $19-million Residence Inn in Anaheim, a 200-suite hotel, was recently completed. Construction is under way on its second, $14-million Residence Inn in San Diego.
A year and a half ago, Ssangyong was interested in the Ambassador Hotel. Kim lost interest because of unresolved questions then about the hotel’s demolition or preservation. He also said a report about the hotel’s development prospects by Kenneth Leventhal & Co., a Century City real estate consulting firm, was not encouraging.
Last January, the 68-year-old mid-Wilshire Ambassador was closed and put up for sale.
Meanwhile, back in South Korea, Ssangyong formed a joint venture called Parsons Pacific Corp. in early 1987 with Parsons Group, a unit of the Pasadena engineering and construction Parsons Corp. “Their technical performance and track record is the world’s best,” he said. Parsons Pacific, which focuses on projects in Korea and other parts of Asia, has received two design contracts for a Korean oil refinery project.