RAK to take over Dh2bn La Hoya Bay

The Ras al Khaimah government is willing to take over project under construction on the man-made island of Al Marjan.

The Ras al Khaimah Government is willing to take over La Hoya Bay, a Dh2 billion (US$545 million) island property project threatened by the collapse of its developer, a senior government official said Thursday. The decision came as a relief to hundreds of investors, mainly from the UK, who have committed their savings to the flagship project of the Ras al Khaimah Investment Authority (RAKIA), on the man-made island of Al Marjan. "We won't make it complicated for investors," said Khater Massaad, the chief executive of RAKIA and adviser to Sheikh Saud bin Saqr, the Crown Prince and Deputy Ruler of Ras al Khaimah. "Those who have paid for a studio will get a studio. The project will be built." Investors had petitioned the Government to come to their rescue after the original developer, Khoie Properties, became insolvent and stopped construction. A senior board member of Khoie Properties is in jail for allegedly failing to honour a cheque for Dh57m written in favour of the Government to pay for the land on the island. Ashley Merry, a London-based investor in the project who acts as a spokeswoman for other investors, said: "Our dream position would be for RAKIA to take over the project and complete it. RAKIA has acted very honourably and graciously to the investors in a very difficult situation." RAKIA has asked the courts to designate an official receiver for Khoie Properties. It will then appoint another developer to finish building the first phase of La Hoya Bay, which consists of seven residential buildings of seven storeys. Mr Massaad said: "We don't want to take the project just like this and continue it. We want to do it in a legal way. This is why we have asked the court to designate a caretaker to continue the project." Rakeen, the property arm of the Government, may become the new project manager because no other developer had come forward. Rakeen is the master developer of the whole island. "If Rakeen is the project manager of La Hoya Bay, it will open an escrow account, award a construction company to do the project. It could all take less than a month," Mr Massaad said. Wahid Attalla, a director of Rakeen, said the project would also be renamed because "La Hoya Bay" has become an "irritating name for everybody". The takeover by Ras al Khaimah is the most direct example of government intervention in the UAE property market, which has suffered from steep price falls, a growing number of defaults and some cases of fraud by developers. In Dubai, the Government has so far favoured assistance to developers in the form of loans. Khoie Properties has already received a 30 per cent downpayment from investors, worth about Dh280m, and the balance was originally due on completion. In return for completing the project, Rakeen proposes to ask investors to pay another 50 per cent of the agreed price in five instalments to finance construction, leaving just 20 per cent due on completion. Rakeen would absorb any loss of the initial downpayment, which is now missing and possibly unrecoverable, Mr Attalla said. "We are even keeping the prices as they are," he said. "The only thing is that there will be escalating payment terms." But RAKIA does not intend to take on any of the liabilities of Khoie Properties. "They took nearly Dh300m from investors. What have they done with it?" Mr Massaad said. If designated, Rakeen will also help investors obtain mortgages to minimise the risk of buyers defaulting and ensure the project goes ahead despite the current tight credit conditions. "We already started discussions with the banks to give them mortgages for the due money," Mr Massaad said. Rakeen is also developing Bab al Bahr, another huge property project on Marjan Island. La Hoya Bay was originally planned in three phases, with the second and third phases themed as Business Village and Regency respectively. The first phase was the most popular. The second phase had a few sales, while none of the third was sold. Rakeen is likely to rationalise all the investors into the first phase. "Our role is really to secure the first phase in order to protect the investors," Mr Massaad said. "Concerning the second, I have met with two large investors who have bought in bulk and they don't have a problem with relocating to the residence part if we are not going ahead with the business." The land designated for the two other phases could be sold to other developers if there is any interest. Once a decision has been made by the court, Mr Massaad said the investors would be informed by e-mail. [e-mail]