Frank Khoie withdraws his permission for RAKIA to carry out work on part of his development while 800 investors await action on RAK island.
Jailed developer freezes project
Frank Khoie, the jailed developer behind the US$800 million (Dh2.93 billion) La Hoya Bay project in Ras al Khaimah, has withdrawn his consent to let the Government of the emirate develop part of the project. Speaking from his cell, Khoie told The National that he now requires dismissal of charges as a condition of changing his mind.
About 800 foreign property buyers, half of whom are based in the UK, are worried about the future of their investment. Two months ago, a local court appointed Rakeen, the development arm of the Ras al Khaimah Investment Authority (RAKIA), as receiver of the development on Marjan Island, which is the emirate's largest development. This would allow work on the project to continue and followed the jailing in June of Khoie, the developer's chief executive.
He was sentenced to three years for bouncing a Dh57m cheque written to RAKIA. The court needed Khoie's consent to declare receivership. He first vetoed this option last May. "In British law, receivership is for companies that are insolvent or bankrupt," said Khoie. "Our company is not bankrupt. We have Dh500m in assets. I am in jail for only the criminal aspect of the cheque." RAKIA appealed and Khoie said he finally agreed on certain conditions. "They agreed to drop the cases, and I agreed that they will become only a project manager. Ownership is mine. It is my money, it is my project, I created it."
The chief executive said he had 60 days to change his mind. "I waited 57 days and I withdrew my consent because they failed to honour their side of the agreement to dismiss my cases and release me," Khoie claimed. "It was our moral agreement." RAKIA officials denied any agreement of that sort. Khoie yesterday posted "settlement proposals" to RAKIA on his website, including an extension on land payment and the dismissal of cheque cases. La Hoya's investors had hoped the appointment of Rakeen would speed up the development, which is still only in the early stages of construction.
"The situation now returns to its original status, to square one," said Neil Pattison, a British investor in the project. Other investors agreed. "It does not look good for us," said Ashley Merry, another British investor in La Hoya Bay. Khoie Properties has already received Dh300m in downpayments from investors and initially procured six plots of land from RAKIA at a total cost of Dh300m. About Dh72m has been paid so far to the authority.
Foundation work on the project started and was then halted, according to the latest court report in September. Khoie said his financial difficulties arose after the bank refused a Dh950m construction loan because there was no electricity supply from the public grid to the site. "The bank was worried that if there is no electricity, investors may refuse to pay the remaining 70 per cent of the price, which is due after completion; about Dh700m."
Khoie blamed the government for not providing the infrastructure on time. "They were supposed to give us electricity, water, which they have failed after four years. They are in breach of contract and do not deserve the [rest of the] money," he claims. Khater Massaad, the chief executive of RAKIA, said he was concerned about investors' interests. "Mr Khoie is trying to present himself as a victim everywhere," Mr Massaad said. "All I am saying is that he has defaulted. The court will decide whether he can keep the project." Mr Massaad suggested Khoie put the money he owes RAKIA into an escrow account and continue construction. "Now we are waiting for him to hand over the site," he said.
A special audit by KPMG was commissioned, according to RAKIA and Khoie. "They will show that not a penny is missing," said Khoie. "We have not done anything illegal. Soon the truth will come out." @Email:firstname.lastname@example.org