The La Hoya Bay saga continues… For those who do not know: La Hoya Bay is a luxury resort development on the United Arab Emirate of Ras al Khaimah, that started in November 2007 but has yet to be started. Let me rephrase that, ground was broken in La Hoya Bay in November 2007, but a brick has yet to be laid towards building the development proper. All we have is the foundations, a show-flat, rumours, accusations, counter-accusations, controversy and a developer in jail for bouncing a cheque.
What’s going on here? In all honesty it doesn’t seem that anyone has the full answer to that question. All we know is that the developers Khoie Group agreed to buy the land for the development from the Ras al Khaimah Investment Authority (RAKIA) in early 2007 for Dh306 million ($83m), but paid only Dh72million ($20m) up front, with post-dated cheques in 6 month instalments for the rest. Off plan sales began shortly after the DH72 million ($20m) payment was complete. Ground was broken in November 2007.
Things went great for the first few months, with investors on the Sky Scraper City forum genuinely pleased at having bought into such a great opportunity, see here with pics showing it as the first RAK development to complete piling, and (if you follow that link into the forum and forward a few pages) that construction was going at a snails pace).
The same forum linked to above tells us that investors first became nervous about the future of LHB between August and October 2008, because of lack of progress, and lack of communication from Khoie; no newsletter for months, and unable to reach anyone. They began putting pressure on the RAK authorities to step in to ensure completion. Still no major problems though.
It all blew up on March 8 2009, when the company CFO made statements saying that the company was insolvent. The next day Khoie Group CEO Frank Khoie admitted that the company had been unable to make the December 1st payment of Dh15 million ($4m), and that RAKIA was pursuing legal action.
The 800 investors, who have paid money for apartments in the development, want RAKIA to take over the development and complete it. When they began the legal action in March 2009 RAKIA said that they did not want to do this, because Khoie Group had collected Dh500 million ($136m) in off plan sales, but had only spent Dh50 million ($13.6m) on construction of the project.
At this time investors reported attempts by RAKIA to collect further payments from them, which they were understandably weary to give.
RAKIA subsequently attempted to take receivership in May 2009, but needed Khoie’s consent to do so, which he refused to give. That was of course, before Khoie was sentenced to three years imprisonment for bouncing two cheques worth a total of Dh114m ($31m), which happened June 25th. Khoie agreed to let RAKEEN, the court appointed developer take over development of the project as a project manager, maintaining that he was not insolvent because of his substantial assets.
Investors were hopeful that RAKEEN would get the job done, but Khoie revoked his consent in December last year. According to Khoie RAKIA had agreed to drop their cases against him in return for his allowing the development to go ahead, and revoked consent because they failed to keep their side of the deal. RAKIA denies making any such agreement.
The latest is that Khoie Group have said that anyone who wants a refund will get one, and that they will be restarting construction within 90 days. Both those statements came at the beginning of this month. Little wonder that none of the investors are holding their breath for either.