An­tho­ny Wil­son

CIBC First Caribbean 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. A rep­re­sen­ta­tive of the sub­scribers, who did not want to be named be­cause of the pos­si­bil­i­ty that the mat­ter could get liti­gious, said: "In the ex­treme, some peo­ple are be­ing asked to pay just short of 50 per cent more than the base price they had con­tract­ed. The orig­i­nal es­ca­la­tion clause was be­tween ten and 12 per cent." On Fri­day last, the two Cana­di­an banks is­sued a threat­en­ing e-mail to the sub­scribers, which fol­lowed a town hall meet­ing on June 27 at which the sub­scribers were asked to con­firm that they would pur­chase their shares at the en­hanced es­ca­lat­ed sub­scrip­tion price. The prospec­tive home­own­ers were giv­en three weeks to sign and re­turn the sup­ple­men­tal sub­scrip­tion agree­ments, on Ju­ly 18, last Wednes­day. The Cana­di­an banks have re­fused to coun­te­nance a counter-of­fer of a low­er es­ca­la­tion and a con­ces­sion­ary in­ter­est loan, in­stead writ­ing the sub­scribers that they are "now prepar­ing to ex­er­cise their rights un­der their se­cu­ri­ty, in­clud­ing the ap­point­ment of a re­ceiv­er" for the de­vel­op­ment com­pa­ny.

The e-mail al­so not­ed that the "sub­scrip­tions paid by the ex­ist­ing sub­scribers would in all like­li­hood be lost as any claim for re­pay­ment would be un­se­cured." The com­plex com­pris­es 74 res­i­dences: Eight pent­hous­es, 28 four-bed­room units, 26 three-bed­room units and 12 two-bed­room units. Thir­ty-four of the res­i­dences were presold and nine were sold dur­ing the con­struc­tion pe­ri­od.