Rakeen takes over stalled project

Rakeen has taken control of one of the largest property developments in Ras al Khaimah from insolvent owner Khoie Properties, bringing relief to hundreds of investors in the project. Rakeen, the development arm of the Ras al Khaimah Investment Authority (RAKIA), said yesterday it would ensure that the rights of investors in the US$800 million (Dh2.93 billion) La Hoya Bay project were protected. About half of the 800 investors are from the UK.

"The RAK Court's decision to appoint Rakeen as custodian of Khoie Properties is a significant step that promotes and protects the welfare of investors and property buyers," said Dr Khater Massaad, the chief executive of RAKIA. The move to place the company under the control of Rakeen follows the jailing in June of Khoie Properties' former chief executive, who was sentenced to three years for writing two bounced cheques of Dh57m each to RAKIA.

Khoie failed to deliver on its promise to buyers of units in La Hoya Bay, its main project in Ras al Khaimah. The move by Ras al Khaimah to take control of Khoie is the most direct example of government intervention in a failed developer as the property industry struggles to overcome steep price declines and growing defaults among investors. It is also thought to be the first time a court has intervened to appoint a judicial custodian for a major developer in the country.

RAKIA appealed to the court requesting that Khoie Properties be brought under judicial custodianship until the completion of La Hoya Bay by a competent developer. The project comprises seven residential towers and more than 1,400 residential apartments. "A judicial custodian is essentially a court-appointed trustee," said Philip Corfield-Smith, an associate of the law firm Pinsent Masons. "A government-owned developer has been appointed to step into the shoes of an insolvent private developer and continue the construction obligations.

"As far as I am aware, this is the first court decision dealing with this issue in the emirate." Khoie Properties has posted a notice on its website "giving consent" to the appointment of Rakeen as project manager for La Hoya Bay. "The La Hoya Bay Investors Group is grateful to Rakeen and RAKIA for all their efforts on our behalf and we look forward to working closely with Rakeen to make the project a success," said Ashley Merry, an investor in the project.

"We are still a little uncertain regarding Khoie Properties and their future involvement with the project, and we are keen to know whether our contracts will now be transferred to Rakeen." Khoie Properties has already received a 30 per cent downpayment from most of the investors, worth about Dh280m, and the balance was originally due to be paid on completion. Under the new payment plan, investors will only be required to pay the remaining 70 per cent. In addition, 50 per cent of the balance can be paid in five instalments with 20 per cent to be paid on handover.

Rakeen will also help investors obtain mortgages to minimise the risk of buyers defaulting and to ensure the project goes ahead despite tight credit conditions. "La Hoya Bay is a high-priority project as it is one of the key components of the first phase of developments on Al Marjan Island," said Dr Massaad. "With so much at stake, we believe that keeping this project on track will further consolidate the reputation of Ras al Khaimah and highlight the local government's proactive support to all investors."

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