Chapter 225 - RiverStar Building in Gangnam (2) – PART 2

Chapter 225: RiverStar Building in Gangnam (2) – PART 2

The total floor space of the building in Sinsa Town is about 5,000 pyung. How much rent do they charge per pyung? Let’s assume the rate of revenue as 6% of the investment amount. Since the building is located on the main road, it should be about that amount.


Say, the investment amount is 200 billion won. 6% of it is 12 billion won. If I take a loan for 80%, I can use only 40 billion of my own cash won instead of 200 billion won. How much would I be paying for the loan interest then, assuming I borrow 160 billion won? If the interest rate is 3.5%, it’s 5.6 billion won. If I subtract that amount from the potential annual revenue of 12 billion won, I will be left with 6.4 billion won.


Out of 6.4 billion won annual revenue, I need to subtract business expenses, taxes and labor fees and stuff. Given the size of the building, I will need a lot of people to maintain that building, like security guards, mechanics to repair and maintain furnace and electricity. Oh, I will need a cleaning crew as well, about 10 people. How much would be the profit then? 2 billion won? 3 billion won? It’s still lucrative. Well, I have to consider the fact that my 40 billion won investment fund would be tied up in that building. It will still bring in profits.


Oh, shoot. I forgot to take into account the depreciation cost of the building. If I assume half of the building price, and if the depreciable life is 20 years, hmmm, I will end up losing money.

Gun-Ho calculated based on several different scenarios around that building, and he figured that buying that building wouldn’t bring that much profit to him at the end.

Well, a person should use their own cash to make more money. If I take a loan from a bank, the bank will make a lot of money, not me. I will easily see this fact if I assume to borrow 50% or 30% of the building price rather than 80% of it.



Gun-Ho felt a headache and wanted to get some fresh air. He tossed the papers he used for the calculation into a trash can and walked out of his office.

Let’s go to Asan Spavis and take a hot spring bath.

Gun-Ho drove heading to Asan City.
It was the first day of work for the new 30 workers in the production field. Most of them were in their 30s and they were all wearing a fresh and newly designed company uniform. They gathered in an auditorium with an ID card hanging around their necks. Most directors and managers were there already, including Manager Jong-Suk Park in the Production Department.
There was a large banner hanging on the wall in the auditorium.
It said,
Welcoming our new employees of 20xx to GH Mobile.

The assistant manager of the general affairs department led the welcoming ceremony for new employees. After the Pledge of Allegiance, President Gun-Ho Goo’s welcome speech ensued.

Our company has recently moved to our current location from Asan City to Jiksan Town. Our factory in Jiksan Town is a newly constructed factory. We are highly delighted to have you all as our new family. If you devote your time and energy to the company and increase our productivity as a result, you will absolutely be rewarded.

Gun-Ho tried to make the speech short. After Gun-Ho’s welcoming speech, the representative of the new employees, who looked to be in his 30s came forward and took an oath in front of Gun-Ho.
After the oath, the managers and directors were introduced to the new workers. Gun-Ho then offered his hand to each of the 30 new workers for a handshake. He sometimes clapped their backs. There were 6 female workers among 30.


Once the new workers were placed in their position, the production field seemed to exude different vibe. The young new workers were fast, dynamic and vibrant. The seasoned workers who came from Asan factory seemed to move faster than before to keep pace with the new workers.
Gun-Ho received a call from his sister.

The elementary school teacher you met the other day, she seemed to be interested in you. Would you like to meet with her one more time?


No, thank you.


Why don’t you give one more chance to it? She is really a decent lady.


I am a decent man as well.


Well, yeah you got the point. You are more decent than her.


I am in a meeting right now. I’m busy. I will talk to you later.


Okay, Gun-Ho. If you happen to change your mind, just let me know any time, okay?

The factory policy had been intensified after they moved to the new factory in Jiksan Town. It just happened that way. When Gun-Ho had acquired the factory in the first place, the total number of employees was 250, and now there were about 240 people working there, including the new 30 workers. The production output had increased while the number of workers stayed about the same. It made the labor cost lower in the production cost.



Here is the current status of our labor cost.

The general affairs manager brought a chart to Gun-Ho to give him a report.

The labor-to-revenue ratio has reduced to below 25%.


Hmm.

The chart that the general affairs manager brought to Gun-Ho was about labor-to-revenue ratio and labor productivity. The chart wasn’t of course made by the general affairs manager himself, but it was prepared by the staff in the general affairs department.

It’s getting better and better. Let’s try to work harder.


Yes, sir.

It was lunchtime, and Gun-Ho went down to the company cafeteria with the internal auditor. There was a long line of workers waiting for their turn to receive their meal, but Gun-Ho and the internal auditor could get their meal right away as the general affairs manager guided them. The meal provided by the company was Korean food with cooked rice and several various dishes.

You are having lunch here today, sir.

The plant manager came a bit late and joined Gun-Ho. Other workers who spotted Gun-Ho having lunch there tried to sit at a table as distant as possible.


Gun-Ho calculated the cost of the meal.
‘240 workers are having lunch here every day. If adding the night shift workers, there will be more than 300 people eat here on a daily basis. If I assume a meal for one person cost 4,000 won, the daily cost of the meal will be 1.2 million won. There will be no rent for the place. So if I give this business to someone outside the company, they will make their living with it. Should I ask my sister and her husband to do this business? Nah. It’s not a good idea to bring my own family or relatives into the company. Let’s just directly manage the cafeteria for now.’
While Gun-Ho was thinking about the cafeteria business in his factory, someone came to the table where Gun-Ho was having lunch with the internal auditor and plant manager as he gave a cup of water to each person. That dispersed his thoughts.
Gun-Ho was taking a break in his office when he received a phone call from the branch manager of the major bank in Gangnam.

President Goo, do you play golf?


I haven’t been in the field for a while. Why are you asking?


We just received a ticket from our bank headquarters. They instructed us to meet with the presidents of the major companies that our bank is working with and have a round of golf. I’d like to invite you for it.


As you know already, we have recently moved to our new location, and I’ve been hectic since the first day of moving. I won’t have time for golf. Instead, I’d like to meet with you.


Something happened?


I need to talk with you about a real estate matter. When will you be available?




You can come any time. We are always at the office.

Gun-Ho made a document using Excel in his office by himself.
He made a chart about RiverStar building in Gangnam. It was about its land, the size, and the lien, etc.
He also attached the real estate registration and the cadaster of the building and the land to the excel chart. He also included the pictures of the building’s exterior and interior that he took with his smartphone when he had visited the location.

I should bring all these documents when I go see the bank branch manager tomorrow. I can’t just go and talk with my mouth alone.

Gun-Ho smiled as he stapled the document altogether.