Yang Hyun Suk Under Fire For Receiving Preferential Treatment Regarding Bank Loans

Yang Hyun Suk, who is already accused of evading taxes, is once again under fire after it was revealed that he borrowed 10,200,000,000 billion KRW ($8,921,889 USD) from Shinhan Bank and used the YG Entertainment building as collateral. When Yang Hyun Suk was applying for the loans, the process for approving the collateral was not transparent, leading to suspicions that he was given preferential treatment.

According to the Seoul Mapo District Office, Yang Hyun Suk took out loans 3 times using his YG Entertainment building and the land it sits on as collateral. His first loan was taken out in August 2010 for 4,680,000,000 KRW ($4,093,572 USD). His second loan was taken out in March 2011 for 1,950,000,000 KRW ($1,705,655 USD) and the final loan was taken out in June 2011 for 3,510,000,000 KRW ($3,070,179 USD).

Each of these loans were taken out by Yang Hyun Suk personally, as at the time, Yang Hyun Suk owned the YG Entertainment building. Since then, he repaid the loans back, and in December 2017, he sold the YG building to YG Entertainment for 11,170,000,000 KRW ($9,770,343).

The problem is Yang Hyun Suk using his building as collateral. Ever since 2010, when YG Entertainment illegally expanded its office space, the local Building Management Ledger has deemed it as a “violation building”.

YG Entertainment was ordered to tear down a 10 pyeong office area on the first floor of their building after it was discovered that they illegally added it to the building. In 2012, they were caught adding 13 pyeong of office space on the 6th floor, and in 2015, they were once again caught trying to add 9 pyeong of space in the 7th floor. There is a total of 42 pyeong of space that YG Entertainment has been requested to tear down due to illegal building extensions.

The Mapo District Office has ordered Yang Hyun Suk and YG Entertainment to tear down the illegally added space every year for 9 years, however they have not taken corrective measures, and have instead been paying a fine each year.

According to real estate experts, loans are supposed to be difficult to be approved for regarding buildings under violation to the added risk that they bring. It is unusual for banks to loan billions of won to buildings that are in violation, such as the YG building, due to the risks that they inherently bring.

When buildings under violation get auctioned off, the value of the building drops, which can be dangerous for things like compensation and price. Buildings that are deemed in violation can have difficultly being used as collateral in the future.

— Jo Nam Hee, Financial Consumer Agency Director

If a building is considered in violation in the building management ledger, it may not be able to exercise its rights such as receiving a loan.

— Kwon Dae Jung, Real Estate Professor at Myongji University

However, there are special cases where banks are willing to provide loans to buildings in violation. This includes undergoing both an internal and external investigation to determine whether the bank’s requirements are met, and if they deem that the building is valuable or can be sold in the future.

The problem is whether or not the YG Entertainment building went through the procedure. Shinhan Bank has stated that their evaluation deemed Yang Hyun Suk to be worthy of the loans, but there is growing suspicion that the loans were approved because of the name “Yang Hyun Suk” and not because of proper procedure.