**1. Introduction**

#### *1.1. Background and Purpose*

Studies have been conducted on real estate development projects concerning the similarities and differences between public and private development projects by country and time of development. If there are no significant differences between these two types of projects, it would be difficult to identify a reason for dividing them according to the project type [1]. For a private development project, to maximise financial return, the project is implemented by establishing detailed and specific strategies at the operation stage, along with identifying indicators for the selection of the development site. For public development projects, the development entities primarily focus on areas associated with total project cost, in which most resources are invested; however, there are also in-depth analyses on the adequacy of development project site selection and the operating expenses arising in the operational stage [2]. In fact, the feasibility assessment— a procedure necessary to initiate a public development project in South Korea—has different impact ranges in demand and benefits, depending on the project site and the economic feasibility analysis stage; it also includes the total project cost and operating expenses over 30 years [3,4]. This process indicates that the total project cost at the construction stage is not the only major

**Citation:** Shim, H.; Kim, J. Determinants of the Economic and Financial Feasibility of Real Estate Development Projects: A Comparative Analysis between Public and Private Development Projects in South Korea. *Sustainability* **2022**, *14*, 2135. https://doi.org/ 10.3390/su14042135

Academic Editors: Pierfrancesco De Paola, Francesco Tajani, Marco LocurcioandFelicia DiLiddo

Received: 28 December 2021 Accepted: 8 February 2022 Published: 13 February 2022

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project determinant. Additionally, since most of the financial resources for a public development project are covered by tax income, there is a pressing need to consider the rate of return, which is similar to the perspective of the private sector in terms of project site selection and operation. This is because, in the case of a development project for a public facility that is continuously in deficit in the operating stage, when analysed over 30 years (i.e., the length of time used for calculation in the economic feasibility analysis), the results will show a negative impact on the local government's fiscal soundness. In fact, 21 public real estate development projects in South Korea have had an annual operating deficit of over KRW 5 billion [5].

For some public development projects that involve public interest and cannot be developed by the private sector, operational deficits may be inevitable. However, there are many other cases of public development projects where this is not the case. Therefore, by not considering the profitability aspect of the project—such as the geographic and environmental conditions of the development site and the operational plans, even when income generation is possible—the overall fiscal soundness of the country can deteriorate, and the project can run in a neglectful manner [6]. Pushing for indiscriminate development without considering competing and similar facilities for public development projects may lead to intrusion into the private sector and concerns about duplicate investment in a facility. Consequently, this approach only results in the unnecessary division of the facility within the region without an increase in total demand while incurring additional costs. Therefore, in selecting a development site for a public development project, it is necessary to implement a project based on the understanding of the competing facilities or the surrounding environment, which are considered for private development projects [7]. Specifically, for large-scale public development projects, there is an unavoidable increase in costs in proportion to the scale of the project. That is, the larger the total project costs are, the more important it is to investigate the status of the environment and establish a development plan for project site selection.

Therefore, it is important to understand the determinants for the selection of a development site and the differences from private development projects to ensure the validity of project site selection [8]. The feasibility study and Central Investment Appraisal, which are preliminary administrative procedures for large-scale public development projects, present only the analysis results and appraisal for the planned project, rarely considering the adequacy of a location as a development site [7].

In this study, an analysis model is constructed as follows. A comparative analysis is performed between the public and private development projects, and the implications of the findings are presented. First, among the administrative procedures for public development projects in South Korea, we analyse those that have been requested to undergo the Central Investment Appraisal for large-scale projects over five years. Among these projects, those that were recommended for additional review for location suitability and consideration of environmental factors, such as similar and competing facilities, are judged to be projects closely matching our purpose. We investigate environmental factors and conditions and identify the factors that affect success in the Central Investment Appraisal.

Second, among the indicators that determine the business feasibility of a private development project, environmental factors around the development project site are substituted and the development site selection method is explored, as well as the measures for ensuring higher profitability and economic feasibility. By comparing the results with those for a private development project, we revise and supplement the research on the determinants of successful bidding for insolvent project financing (PF) projects conducted by Shim and Kim [9] to determine the characteristics of project sites for the business sites that underwent the bidding process in the private sector. To this end, as in the analysis method for public development projects, we derive the determinants for successful bidding in private development projects by considering the environmental factors related to location suitability.

Third, based on the results of the two analyses, we conduct a comparative analysis of public and private development projects and present measures to improve economic feasibility and profitability and their implications by using development project site selection— an area that has received little attention in relation to public development projects.
