The latest setback follows a decision by La Hoya Bay's developer, Khoie Properties, to withdraw the legal consent it gave last September. When Khoie Properties was deemed to be insolvent the Ras Al Khaimah court granted legal custodianship of the La Hoya project to the government-owned developer Rakeen.
However, Frank Khoie, the CEO of Khoie Properties, now claims that he has withdrawn his legal consent for Rakeen to take over the development. "To end the stand-off and protect our investors, I compromised by giving my consent to the court to appoint Rakeen as the project's manager, provided they would dismiss the baseless claim on the cheques and release me," Khoie wrote to Property magazine from prison.
Rakeen, on its part though, has reconfirmed its commitment to build La Hoya Bay, citing that as per the court's ruling it is still the judicial custodian of Khoie Properties FZ.
"Rakeen is liaising with Khoie Properties FZ and the court for the handover process in accordance with the court judgment and is in the process of finalising a remedial action plan in relation to La Hoya Bay project to be submitted to court for the later blessing," says Rakeen's managing director, Ghassan Youssef, in a statement issued to Property.
But the on-going issue is not merely confined to a developer finding it difficult to meet his obligations to the authorities and his investors. There is also a personal — and poignant — facet to the present situation.
Khoie was arrested late last year, released on bail for two weeks and then rearrested at the end of January and sentenced to three years in prison. This was after his cheques — for payments that were due for the land in La Hoya Bay — bounced.
But Khoie says he tried to prevent the project from stalling by holding meetings with the Ras Al Khaimah Investment Authority (Rakia) on several occasions during September, October and November 2008 to find a solution to his financial impasse.
"They should simply give me a 12-month extension on my land payment and let me get on with my project," he says. Khoie is convinced that as the financial crisis eases, he may be able to secure funding.
Payment status
To date, land payments worth Dh72 million out of a total of Dh302 million have been paid. According to Khoie, the original Land Sales Purchase agreement required Rakia to provide utilities and infrastructure to the plots in exchange for the balance of four instalments of Dh57 million each, which relate to the bounced cheques.
"The land is not in our name, and after three years, there is not a single evidence of electricity, water, sewage, district cooling, telecom, road lights, landscaping on our plots or anywhere on Marjan Island," Khoie alleges. "They are in breach of contract and do not have the right to cash our cheques, which were issued as security cheques."
Khoie has filed for appeal in Ras Al Khaimah Court and is prepared to approach the Abu Dhabi Federal Court to secure his release. "I withdrew my consent and cancelled the judicial custody," he maintains.
Khoie argues that his company is not insolvent, but is, like many others, going through a liquidity squeeze. The La Hoya Bay development, at the piling stage back in mid-2008, was stopped in its tracks when the developer failed to secure a Dh950 million construction loan as the global financial crisis set in. The 800 buyers into this project were asked to pay only 30 per cent of the purchase price and the rest on completion, which meant the developer had to self-finance a large chunk of land and construction.
The developer points to the details of the expenditure, which he says have been independently audited by Ernst & Young. The accounts provided by Khoie Properties show Dh262 million received from investors and an expenditure of Dh341 million, all project related apart from that for the American School, inaugurated under Khoie Education in November 2008. The school operated for two months and was closed in February 2009. "We have paid everyone (contractors, suppliers, and so on), but some Dh18 million balance (outstanding), which is the result of my detention and freezing of our bank accounts, in which we have over Dh3 million," Khoie insists.
Property investors in La Hoya Bay had welcomed Rakeen's takeover, their interest primarily lying in not who but that the development gets built. And they do not want to be let down by more false dawns.
What Rakia says
"We don't want to see Khoie's clients lose money in Ras Al Khaimah, we need to protect buyers. What has he done with the millions received by investors? He is not building."Dr Khater Massaad, chairman of Rakeen and CEO of Rakia
