Banks after $850m. owed
PORT OF SPAIN — CIBC FirstCaribbean and RBC Royal Bank are threatening to appoint a receiver as they try to recover debts of $850 million owed to them for the construction of the luxury, high-rise apartment complex, known as the Shorelands Renaissance.
The project, which is estimated to have cost $1.1 billion, was originally due to be completed in April 2008. It was eventually delivered – more than four years late and hundreds of millions over budget – last month. The bone of contention among the banks, the development company and the prospective homeowners is who should pay for the escalation in the cost of the project.
The development company is 50 per cent owned by members of the Rahael family, and 25 per cent each by property developers Jeffrey Guillen and Richard Woodruff.
The project, which started in March 2006 faced delays and escalating costs of labour and materials in its early days as all property developers struggled with the construction boom between 2005 and 2008. As a result, by 2010 the developers needed approximately $425 million to complete the project, said Joseph Rahael, a director of Hyancinth Akow Ltd, the property development company.
Having sold 43 of the 74 residences before and during construction, in April 2010, the developers expected to earn $550 million from the sale of the 31 unsold units and $300 million more from the prospective homeowners, who were required to make the down payments for their units in the form of share subscriptions.
In order to qualify for the loan, the developers were required to pledge additional collateral in the form of property as well as get the subscribers to agree to pay enhanced escalation costs, Rahael said.
“The majority of subscribers agreed to that enhanced escalation and indicated their willingness, in writing, to pay it. The problem is that a number of subscribers who had indicated their willingness to pay the enhanced escalation are now saying they are not prepared to do so,” according to Rahael.
He refused to disclose the exact number of subscribers who had agreed to pay the escalation or how many are now refusing to pay it. (Guardian)