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.

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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.”

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“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.