The Project

The La Hoya Bay project is located on Marjan Island, Ras Al Khaimah and has a land area of approximately 1,500,000 sqft comprising of the following sectors:

• Sector a: La Hoya Residences: comprising seven residential buildings and recreational facilities
• Sector b: La Hoya Bay Business Village: comprising offices with Free Zone status, apartments and retail – space
• Sector c: La Hoya Bay Regency, a European Village: with 12 nos. residential buildings, retail
  and a 200 room hotel
• Sector d: La Hoya Bay Autumn Leaves: premium service apartments with medical facilities, private Yacht Club and community center for the semi-retired
• Sector e: La Hoya Bay Bermuda Hotel and Apartments: a 800 quality condominium apartments, and a 300 room hotel and Yacht Club.
• External Works: Include landscaping, three marinas and swimming pools.

The gross floors built up area will be around 5,500,000 ft2.

Mr. Frank Khoie Chairman of Khoie Properties stated that he is very happy to reach this agreement with Arabtec Construction for building this prestigious project in Ras Al Khaimah which will be of great benefit to enhance the development of Ras Al Khaimah as a destination of quality waterfront and resort environment living and expressed confidence in the ability of Arabtec to deliver the works to the highest standard and in a timely manner.

Mr Riad Kamal Chairman of Arabtec Construction said that Arabtec is very pleased to reach such an agreement with Khoie Properties for this prestigious project which will add to its long list of iconic projects developed and executed in the U.A.E.

The Main Consultant for the entire La Hoya Bay is Paul DeVylder – Architect JLT (PDA), who is leading all design and engineering services. Commercial Management Services will be undertaken by Northcroft Middle East, part of the Northcroft Group, one of the oldest Chartered Quantity Surveying Companies in the world, established in 1840 and headquartered in London.

Media reported angry scenes at the meeting, as executives repeated what Frank Khoie himself said on Thursday from his prison cell. Khoie has told investors they can claim refund within 90 days and that construction then will commence. Investors, on the other hand, were curious to know how they can apply for a refund and how Khoie will be able to pay.

“Is there any substance to him saying he will be in a position to refund investors? If he can afford to refund investors, why hasn’t he settled his debt and got himself out of jail?”

Ashley Merry of the La Hoya Bay Investors Group said to 7Days. She believed many investors would want a refund but they were unsure how this could happen, as Khoie left no information about how the refund or the process will be.

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.

The National

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.

The National

‘Following last year’s credit crunch and its impact on the UAE’s real estate market, we were unable to meet our December 1, 2008 land payment of $15 million to Ras Al Khaimah Investment Authority (RAKIA),’

CEO of Khoie Properties, Frank Khoie, said in a statement.

‘Rakia’s officials have not been able to accept our deferred payment proposals and have taken legal action,’ he said.

Khoie said they are in discussions with RAKIA for a possible handover of the La Hoya Bay project, but a senior RAKIA official denied this. The official, who declines to be named, said that Khoie Properties had collected Dh280m from the investors of La Hoya Bay but had only spent Dh50m on construction.

Frank Khoie was not immediately available for comment when contacted by Reuters.

La Hoya Bay is located on the man-made island of Al Marjan in Ras al Khaimah and was sold to 800 investors, of which 50 % are from the UK. The investors are pressing the Government of RAK to intervene because little progress has been made on the project.

“The company being insolvent means you are unable to meet your liabilities. So it is basically insolvent,”

said Ahmad Jazayeri, the chief financial officer of Khoie Properties.

Senior member in jail

A senior member of the board of Khoie Properties has been in jail for nearly two months after being detained for allegedly bouncing a Dh57m cheque written to pay for the land.

“He is in prison for one bounced cheque worth Dh57m, but every six month there is another cheque,”

said Wahid Attalla, the executive director of Rakeen, the property arm of Ras al Khaimah Investment Authority (RAKIA).

“Honestly, he does not have enough funds to meet his obligations,” Mr Jazayeri said, confirming a senior member is detained.

Investors pushing RAKIA

The La Hoya Bay Investors Group have faith in the project and 70 investors have signed a petition encouraging RAKIA to take over the project and finish it

“We are delighted that RAKIA is in negotiations with Khoie to save this exciting project and to retain the existing investors,” said Ashley Merry, a spokeswoman for the La Hoya Bay Investors Group. “We still have faith in La Hoya Bay. We are grateful that they have actually taken an interest and are negotiating, whatever the outcome.”

Both RAKIA and Rakeen, the buyer of La Hoya Bay, are in talks with Khoie to ascertain the developers’ liabilities. A possible takeover has been suggested but RAKIA resist this option:

“I do not think such a deal will happen,” said Khater Massaad, the chief executive of RAKIA. “The problem if we take over the project is that we will have to put in cash. Khoie Properties collected Dh280m and only spent Dh50m in the construction of the project.”

Mr Jazayeri said that two-thirds of the investors’ contributions had been spent on the project.

History

In 2007, Khoie bought plots of land for La Hoya Bay from RAKIA, worth a total of Dh306m, and began off-plan sales to investors. Instead of paying the total amount, Khoie paid Dh72m to the authorities and provided post-dated cheques every six months to cover the outstanding amount. Mr Jazayeri said the next cheque was due in June.

Close to making a decision

According to Mr Attalla, the government is close to making a decision.

“What we have is a developer who is more or less bankrupt and the Government of Ras al Khaimah, represented by RAKIA, is trying to find a solution for the sake of the investors. But it is all about how much liability there is. There is a limit to how much we can do.”

The National

“We will not be able to build any project in RAK now. Everything that we own in the emirate has been sold to Rakeen,” Frank Khoie, Chief Executive Officer, Khoie Group, told Emirates Business.

The Khoie Group is a $2 billion (Dh7.34bn) company with a number of subsidiaries under its management. Khoie Properties has a land bank of Dh750m in Dubai and Abu Dhabi.

The La Hoya Bay project in Al Marjan Island comprises five elements: La Hoya Bay Residences, La Hoya Bay Business Village, La Hoya Bay Regency, La Hoya Bay Hotels and Apartments and La Hoya Bay Marina and Yacht Club.

In July last year, Khoie said the developer was nearing 20 per cent completion of the project and finished the first level on the residences.

La Hoya Bay residences comprise seven towers and 1,400 residential apartments. La Hoya Bay Business Village is a half-a-million square feet office and retail space that was scheduled for completion by March 2009. La Hoya Bay Hotels and Apartments will be a three-cluster development connected to each other, offering 200 five-star hotel units along with 700 serviced apartments that was to be completed by June 2010.

Khoie had told this newspaper last year that the developer was planning to list on the Dubai International Financial Exchange by 2010 and was also looking at a dual listing on London Stock Exchange. The company was to be valued at Dh15bn by 2010.

Khoie Group was also planning to enter in the financial sector with the establishment of a subsidiary in early 2009 called Khoie Finance in DIFC.