Lagoon boss: 'Delays were beyond our control'

EXCLUSIVE: Schon Properties VP explains all over much-delayed Dubai project.
Lagoon boss: 'Delays were beyond our control'
By Tamara Walid
Mon 01 Sep 2008 10:32 AM

The developer behind the much-delayed Dubai Lagoon development has insisted that their problems are behind them and the project will now be finished by the second half of 2011.

Schon Properties said on Monday that difficulties including cancelled contracts and work permit freezes were beyond their control.

And the appointment of an additional contractor, Belhasa Engineering and Contracting Company, company bosses say, will help to speed up the construction of zones 3 and 6 of the project. Site work is scheduled to begin in October.

In an interview with Arabian Business, Danial Schon, vice president of Dubai-based developer, added that the majority of investors who have been offered refunds because of the delays have chosen to stick with the project.

After long delays and angry protests from disgruntled investors, the developer has agreed to grant refunds to investors who were sold plots in 2005 with a completion date of the end of 2007.

Schon said: “Initially people wanted refunds. The reason why we didn’t give blanket refunds is because many use it as an excuse. At a time when people purchase an apartment for $163,000 they’ll put $1,633 down as a token and we give them one week to pay the full 15 percent which is $24,500.

“They’ll try to flip it in the market and if they can’t flip it they’ll come back and ask for a refund. That’s why we did it on a case by case basis,” said Schon.

“Legally, we are not obliged to give refunds. A lot of developers in Dubai do not give refunds. Once money is gone it’s gone,” he added.

Schon explained that most investors have made purchases for the average price of $190 per sq ft with an easy payment plan, free of interest. Today the same property is valued at $408 per sq ft.

Schon explained the reasons behind the major delays to the Dubai Lagoon project, which was initially estimated at a cost of $272 million. Today, delays have bumped its value to $598 million.

He insisted his company, as developer, was powerless to avoid the delays.

In January, 2006, the first phase of the 6.9 billion sq ft project was publicly launched. A road contractor was appointed in February, followed by the launch of phase two in April.

“In June (2006), we hired Daewoo DSME, one of the largest companies in the world and Sunjin Civil and Architecture. It was a joint venture between those two companies. We signed contracts with them and they were supposed to commence works by August 1, 2006,” Schon said.

Schon added the contractor was paid $1.36 million as an advance, only to be replaced later due to political issues back in its home country, South Korea.

“We cancelled the contract, went to the second bidder. We got a Thai company onboard immediately, Powerline Group,” he said.

In September, The Presidential, a luxurious residential block, was launched.

But in October 2006, as construction works were about to commence, the Roads and Transport Authority (RTA) was formed and it conducted a traffic impact study which required permits to be obtained by the master developer of Dubai Investment Park, housing the Dubai Lagoon project.

“There was a freeze on our building permit because the traffic impact study was incomplete. This was from October until March,” added Schon.

In March 2007, RTA approval for the master developer was obtained and in May 2007, the approval for the project master plan was granted.

But the following month, another freeze was placed again on the development because RTA had a new initiative, a road widening project.

“The contractor has been waiting for nine months after all this bureaucracy and red tape already. It’s good for the country in the long run but unfortunately this is the reason for the delay. All this was beyond our control as a developer. How could we control what RTA says?” Schon said.

Following negotiations, Schon was forced to reduce the development’s parking space. Buildings were compressed and a double basement parking was created.

“You can imagine how much extra cost this one year delay has resulted in,” said Schon.

By November 2007, the company finalised its revised plot area plan.

Then the contractor’s pace of construction appeared to be slower than anticipated and not “up to par”.

Belhasa Engineering and Contracting Company, was appointed this month at $318.5 million to speed up the process and to handle the construction of zones 3 and 6 of the project. Site work is scheduled to begin in October 2008.

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