By Ed Attwood
Investors ask whether developer put cash into other land speculation, failed projects
Investors in the Bahrain’s stalled Marina West housing project have reacted with indignation to a letter from the developer’s CEO confirming its commitment to the troubled site.
The letter was set to buyers in the Bahraini project, which is based in Budaiya Village, and where work was halted in March last year due to a lack of funds.
The CEO of Marina West, Mahmood Janahi, said in the letter that discussions with regional and international investors to get the project back on track were “currently at a very advanced stage”.
Janahi also said that company was negotiating with several parties over raising debt for the project, and that feedback so far had been “positive”.
In addition, the CEO claimed that “a well known financial advisory and consultancy firm” had been hired to review all the Marina West accounts, which would help the firm achieve a syndication arrangement with local Bahraini banks.
The letter said that the total sales value of the 612 units sold in the project amounted to $175m, around 75 percent of which had been collected. Those units represent 52 percent of the total residential space in the development.
A spokesperson for the Marina West Owners Association told Arabian Business that buyers in the development were “cautiously encouraged” by the letter, but also raised questions about whether the developer had invested buyers’ cash into other land speculation or failed construction projects.
In addition, the spokesperson added that all existing apartment sales contracts had expired at the end of last year, without houses being handed over, or money refunded.
“All clients will want to be compensated for their losses, which clearly began before the world or regional financial crises,” the spokesperson said. “Buyers have been paying expensive rents in lieu of their owned properties since end-2009, the original date for project delivery. Most apartment buyers agree that Marina West problems have been self-inflicted by the greed, mismanagement and possible fraud of the project developers.”
Another investor cast doubt on Mahmoud Janahi’s claim that 52 percent of residential space had been sold, when the CEO announced, in an October 2009 press statement, that 60 percent of the units in the development had been sold.
“The CEO reckons $175m has been paid by buyers to Marina West; this is way under my figure based on 612 apartments sold,” the investor said.
“His 75% comes about because he appears to have averaged all the percentages. He really needs to consider each apartment's sale price then apply the individual’s repayment schedule and this will give him the amount paid to Marina West by a specific date. Easier still he can add up his buyers’ payment figures and compare this with the valuation of apartments sold. This will result in excess of 75%.”
“No actual completion date nor firm plans were announced [in the letter]…we have serious doubts about the viability of the developers in bringing this project to a successful completion,” another Saudi-based investor told Arabian Business.
I have only one wish : that they complete the project, compensate the buyers, and that this CEO is judged by a court. They have destroyed my last 2 years and other people's too.
As a real estate agent, I believe they will eventually complete the project, especially as the market is picking up after Sept 2011 and Bahrain Bay is continuing their development. I think had the protests not begun, they would have had a better chance to continue the project. Unfortunately, the protests had almost destroyed the economy and brought down the reputation of the country for investment. It was a high-risk investment to begin with to construct many towers in a single development at once. But look at it this way, Dubai's market is worse. We cannot blame the developer for the global economic crisis. Investors should also assess the risks of their own investments, since business is business and it can fail. It is good to hear back from Mr. Janahi, the towers are still there and just need to be completed. Investors should wait it out, even if it takes 5 more years to complete as large scale projects take time.