The $500mil hotel to change hands?

17:05' 31/07/2007 (GMT+7)

VietNamNet Bridge – The Kanagawa-Vietnam Economic Exchange Association has sent a letter to the Hanoi People’s Committee, announcing its intention of setting up a company in Singapore in charge of running the project on the five-star hotel on the X2 position on Pham Hung road, which Riviera and CSK Finance got the investment rights for in March 2007. A design by Riviera (File photo) When asked to comment about the decision, the Hanoi Planning and Investment Department said that the establishment of a company in Singapore, named SPC, would change the investment legal entity, the investment country and other factors which were accepted by Hanoi authorities in Decision No 1051 dated March 20, 2007. The change of the investor (Singaporean instead of Japanese) does not come in line with the Hanoi authority’s policy regarding the Japanese investor, and thus may raise a complicated lawsuit. According to the department, the construction of a five-star hotel on X2 position (Pham Hung Road, near the national convention centre – a very advantageous position) is an important work to commemorate the 1,000th anniversary of Thang Long-Hanoi. Hanoi authorities chose Riviera and CSK Finance as the project investors out of a lot of other candidates based on the strategic relationship between Vietnam and Japan and the commitments the investors made to the city authorities. Any changes to the project must be approved by the Hanoi People’s Committee in writing. However, the Hanoi People’s Committee, in Document No 3670 dated July 9, 2007, stated that the letter sent by the Kanagawa association was not legal enough to be considered for approval. The letter on the change of investor was signed by Kouhei Suzuki on behalf of the Kanagawa- Vietnam association. Meanwhile, in a communiqué dated December 12, 2006, Riviera and CSK Finance, the official investors of the five-star hotel project, only authorised the association to deal with the Hanoi People’s Committee and relevant agencies to promote investment procedures. The document did not state that the association could act on behalf of them in issues relating to the content of the project. While waiting for the Hanoi People’s Committee to make a final decision, in order to ensure the planned construction pace (construction begins in September 2007 is to be completed in the second quarter of 2010 at the latest), Riviera and CSK Finance still have to fulfill their commitments from before. According to the Hanoi Planning and Investment Department, the project implementation of Riviera and CSK Finance has been going slowly since they got the right to run this project. The investors asked for a delay in presenting the document of guaranteeing the project’s implementation, which should be seen as a break of commitment. Under the city’s regulations, investors must complete the procedures for getting the investment certificate in the second quarter of 2007. However, the work has not been done yet. The investors have asked for a delay in submitting necessary documents for getting the investment certificate to August 3, 2007 instead of July 30, and the ground breaking ceremony will also be delayed to September 20, 2007. If Riviera and CSK Finance still delay the showing of the guarantee for the project’s implementation, it is likely that the city authorities will consider revoking the decision on choosing the two groups as the investors. If so, there will be two scenarios. First, Hanoi will ask the Japanese Embassy to introduce another Japanese investor who can run the project with the same conditions stipulated for the two previously chosen investors. Second, Hanoi will organise public bidding to select investors for the project. To date, the only sum of money Riviera and CSK Finance have paid to Hanoi authorities since they were chosen as the project investors was $3mil in non-refundable aid for the city. Meanwhile, the investors will have to pay the remaining 2.5mil ($5.5mil of non-refundable aid in total) right after they get the investment certificate for the hotel project on the X2 position. As committed, the investors also have the responsibility of paying the sum of $50mil to the Hanoi Treasury as a guarantee for implementing the project (10% of the suggested total investment capital of the project). Moreover, within 30 days after the investors sign the contract on leasing land, investors have to pay the whole sum of money for leasing land for 50 years (the unit price is VND140,000/sq m/year). The hotel projected to be built on X2 position on Pham Hung Road has the total space area of 4ha, and investment capital of $500mil, 18 storeys and 550 5-star hotel rooms. The transfer of investment projects is not prohibited under current law; it is stipulated in provisions 65 and 66 of Decree 108 dated in 2006, guiding the implementation of the 2005 Investment Law. However, the Government has not promulgated detailed regulations on the conditions and procedures for projects using land. Viet Nam Net