The company behind the controversial development of Phnom Penh’s Boeng Kak neighborhood says that a pending multimillion-dollar land sale to a Singaporean firm was unlikely to happen due to financial difficulties on the part of the prospective buyer.
In June, the HLH Group announced that its new subsidiary, D’Lotus Development, had agreed to pay $14.9 million for a 1.35-hectare plot of land from Shukaku Inc., a firm owned by CPP Senator Lao Meng Khin.
With the city’s help, Shukaku evicted some 3,000 families from Boeng Kak, many say illegally, to make room for the project. The mass eviction prompted the World Bank to freeze all new lending to the country.
Shortly after HLH went public with the deal on the Singapore stock exchange, the firm’s CEO and executive deputy chairman, Johnny Ong Bee Huat, said he knew nothing of the well-publicized controversy surrounding the piece of land he was preparing to purchase. He said HLH was committed to following all local laws and was conducting a six-month legal review of the deal before deciding whether to make the actual purchase.
Housing rights groups questioned whether Shukaku could even legally sell land it was leasing from the city.
On Thursday, a spokeswoman for Shukaku, Amu Pillay, said for the first time that the land sale was unlikely to materialize, following a review of HLH’s financial records.
“We don’t foresee that that is going to happen because there are some financial matters on their side,” Ms. Pillay said. “We don’t know whether they can afford the project or not.”
And with Shukaku unlikely to sell the land to HLH, she added, “we just have to move on to a more suitable partner.”
HLH declined to comment on the prospects for the deal, but said money was not an issue.
“As an international public listed company, we definitely have the ability in financial aspect to complete any purchase or project,” said Mr. Ong’s personal assistant, Shane Goh, in reply to an email sent to his boss.
“At the meantime,” he said, “we are still waiting for parties [Shukaku] to comply on documentation before we can take further steps…. [T]he ball is not in our court.”
In its announcement to the Singapore bourse in June, HLH said it was planning to use the Boeng Kak land to build an office tower, luxury condominiums, retail space and restaurants. It said the purchase price for the Boeng Kak land, $14.9 million, came to less than a third of the firm’s market capitalization, which stood at $51.2 million at the time.
HLH would be the first company to buy any Boeng Kak land off of Shukaku, which paid $79 million to the city for a 99-year lease on the 133-hectare site in 2007. The site has since been cut down to about 120 hectares on orders from Prime Minister Hun Sen.
At least two Chinese firms have already pulled out of partnerships with Shukaku to develop the site, which remains empty save for a few roads. The latest company was the Erdos Hongjun Investment Corporation, which, according to government records, had proposed to commit more than $2 billion to fill the site with luxury villas, condominiums, soaring office towers and five-star hotels.
On Thursday, Ms. Pillay said Shukaku had not found another backer to replace Erdos but was nonetheless moving ahead, using its own funds for the construction of a drainage system and five-story office block, scheduled to begin by the end of the year. She said Shukaku was also expecting imminent approval from City Hall for a public park.
She said a new, overall master plan for the site was approved by the city earlier this month.
The forced evictions that cleared the way for the project have sparked dozens of protests among angry residents over the past few years, many of them broken up violently by police and government security guards.
Last month, police arrested seven Boeng Kak women for placing a bed in the middle of Monivong Boulevard to protest the neighborhood’s repeated flooding, which they blame on Shukaku for having filled in a local lake that was crucial to the area’s drainage during the rainy season.
The Phnom Penh Municipal Court convicted them of obstructing traffic the following day and sentenced them to a year in jail. Their lawyer filed an appeal last week.
(Additional reporting by Khy Sovuthy)