- Dispute between Lanka Realty and SLTDA
- Land leased to foreign party in August 2019
- Plans for $ 15 million eco chalet resort
[caption id="attachment_89022" align="alignleft" width="300"]
One-Nature-Hotel-Resort-in-Nyaruswiga-Serengeti[/caption]
By Madhusha Thavapalakumar
An ongoing legal dispute between the Sri Lanka Tourism Development Authority (SLTDA) and a local investor over a plot of land is preventing the arrival of a foreign investor with a $ 15 million investment, industry sources told The Sunday Morning Business.
The investor, Dubai-based One Nature (Pvt.) Ltd., is willing to commence construction on the seven-acre land in question situated in the Yala Palapatuna area, despite the devastation caused to the tourism industry by Covid-19.
The land was leased to Lanka Realty Leisure (Pvt.) Ltd., which was then known as Ascot Leisure (Pvt.) Ltd., for 99 years by the SLTDA in 2014. Nevertheless, six years after obtaining the land for lease, Lanka Realty is yet to commence construction work. This compelled the SLTDA to consider leasing the land to a new potential investor last year.
On 6 August 2019, the then Cabinet of Ministers granted approval for the land to be allocated to the sister company of M/s One Nature (Pvt.) Ltd. for a 50-year lease for the development of a tourist resort comprising 28 fully equipped villas.
Lanka Realty had then gone to courts against this move and the Colombo District Court issued an enjoining order against the SLTDA on Tuesday (16) for claiming the said land “unlawfully”.
Leasing of the land in 2014
Following the end of the Civil War in 2009, the then Government planned to develop the country to attract potential investors. Under this plan, the Government decided to develop Yala Palapatuna as a Tourism Zone, and accordingly, the Government leased seven-acre plots to seven investors including Lanka Realty, with the agreement signed on 13 May 2013.
Lanka Realty made a down payment of Rs. 30 million for the land and has settled taxes for the period until 20 December 2020. According to reliable sources Lanka Realty has made a payment of about Rs. 40-50 million and has been paying Rs. 10,000 monthly.
Lanka Realty had also claimed that the land that had been leased to One Nature is not the same land which was given to Lanka Realty in 2014.
However, a Cabinet memorandum, dated 18 July 2019, signed by then Minister of Tourism, reads that the Cabinet allocated Lanka Realty a seven-acre land in the Yala Palapatuna Tourism Zone by decision No. 12/13/519/019 dated 4 October 2012. It further reads that even though Rs. 29.3 million had been paid by Lanka Realty, the company failed to pay any single monthly payment.
Further, in terms of a commencement notice issued on 19 April 2016, construction had to be completed within 24 months from this date. The implementation timeframe submitted by Lanka Realty to an SLTDA query on 16 August 2016 stated that testing and commissioning was to be completed and handed over for operation by 26 February 2018 which had also expired, and that as of the day of the aforementioned memorandum, no construction work had begun on the site, but a foundation was constructed in 2016.
Reasons for delay
Lanka Realty has not commenced any work up until now at the said land and The Sunday Morning Business reliably learnt that it remains bare. Lanka Realty has been attributing the delay in commencing construction work to a dispute between the shareholders of the company, the Easter Sunday incidents, and the latest Covid-19 pandemic.
The shareholder dispute emerged after Lanka Realty was acquired by the current owners three years ago. According to Lanka Realty, due to a fraudulent share transfer during the takeover, interim injunctions were filed against the respondent companies – Ascot Holdings, Ascot Leisure (Pvt.) Ltd. and Fairway Holdings Ltd. – with regard to the purported transfer of shares. Reportedly, this prevented the company from pursuing ordinary functions and even routine matters, such as filing the annual return, were delayed. Hence, the company was advised to defer the commencement of the project until this issue was resolved.
Nevertheless, investors who acquired the other seven-acre plots for lease have concluded construction and the hotels are up and running, including the popular Cinnamon Wild, Yala.
Enter 'One Nature'
[caption id="attachment_45690" align="alignright" width="300"]
The Government decided to develop Yala Palapatuna as a Tourism Zone in the early 2010s.[/caption]
Due to the long delay in developing the land and the fact that the delay was hindering the Government's plan to develop the area as a Tourism Zone, the then Government, headed by Maithripala Sirisena, decided to look for another potential investor. Accordingly, a proposal was made by then Minister of Tourism Development, Wildlife, and Christian Religious Affairs John Amaratunga to lease this land to One Nature. The proposal was approved by the Cabinet of Ministers on 9 August 2019, which can be found listed as the sixth decision on the list of decisions that were approved that week.
Accordingly, the SLTDA board of that time had terminated the lease agreement and taken the physical possession of the property under Clause 12 of the agreement, which was given to One Nature in August 2019 for an investment of $ 15 million with the per night rate of each villa being approximately US$ 1,600. The memorandum further states that it is 100% FDI and would be a great opportunity to consider an environment-friendly development.
According to sources, One Nature is also aware of the legal issues raised by Lanka Realty but they are willing to stay on hold until the issues are resolved. When contacted, the local representative for One Nature told The Sunday Morning Business that the company has faith in Sri Lanka's foreign direct investment (FDI) policy process towards the tourism industry, as the SLTDA has provided them with a guideline process to enter the market with ease.
Upon the settlement of this issue and the green light to commence construction, One Nature is aiming to complete the first phase of its construction within one year from the agreement date, at a value of $ 9 million. The second phase worth $ 6 million will be completed within one year from the completion of the first phase, making the total investment $ 15 million.
"We are still interested in investing in Sri Lanka and exploring other opportunities within the tourism industry and thrive to uplift its standards, highlighting Sri Lanka as an exceptional high-end holiday destination to the world," One Nature noted giving a statement to The Sunday Morning Business.
One Nature stated that they wish to create an environment to enhance the reach of the Sri Lankan tourism industry to the world by being green, eco-friendly, stable, and luxurious, and by paying attention to detail using only the best materials, technologies, and measures, providing all tourists with a unique experience they wish to treasure forever.
''We have proven this in our Nyaruswiga camp in Tanzania and from now on we are obliged to ensure that all our nature resorts are always proof that luxury and eco-friendliness and sustainability can go hand in hand. This is our goal and it is one of the company's core values,'' One Nature added.
Our sources noted that One Nature has already obtained the necessary approvals and completed feasibility studies.
The enjoining order
Even though the SLTDA claims it had sent a number of letters to Lanka Realty pertaining to this issue for a considerable time period, the company has recently responded that they have not received any such letters from the SLTDA. They had then gone ahead and filed a lawsuit against the SLTDA.
The lawsuit was filed by Lanka Realty Director Hisham Jamaldeen. He acquired Lanka Realty in 2017 from Irugalbandara, who was the owner of the company when the leasing agreement was entered into with the Government.
The company stated that the delay in commencing construction was duly informed and explained to then SLTDA Chairman Kavan Ratnayake by discussion on 6 April 2018 and also a letter dated on the same day along with a copy of the court proceedings and by letter dated 5 June 2018.
Lanka Realty claimed that subsequently, the case was settled by both parties, and by letter dated 11 April 2019, the situation was informed to then Chairman Kishu Gomes and as no written response to any of the correspondence was received, the company was under the impression that an extension to complete the project was acknowledged.
Lawsuit filed by the company further noted: ''Much to the plaintiff company’s dismay, a letter dated 13 November 2019 was posted on 15 November 2019, a day prior to the presidential elections (which was only received by the Plaintiff on 28 November 2019), without any communication or even an attempt to hold a meeting.''
The company went ahead and stated that the SLTDA had fraudulently taken steps to execute a deed of declaration for the cancellation of the lease deed dated 28 May 2020 attested by P.D.I.S. Punchihewa without the consent of the lessee (the plaintiff company), and this was reportedly enhanced by the fact that the country is just emerging from effects of the Covid-19 lockdown.
The company added that the SLTDA was still adamant to prevent investors from commencing projects.
''A complaint was made on 2 June 2020 to the Hambantota Police by the SLTDA against the plaintiff company stating that we have made an illegal construction at the site. An inquiry was held on 10 June 2020 at the Hambantota Police Station, in the presence of both parties. It was recorded that this is a civil action and that the Police cannot intervene. The Police directed to settle the issue amicably or in court'' the company added.
The Chairperson connection
Jamaldeen went on to allege that SLTDA Chairperson Fernando's behaviour amounted to “nepotism”, a reference to the adjoining land’s lessee, Wild Coast Tented Lodge, which is owned by Malik Fernando, the husband of Kimarli Fernando. The contention was that she was attempting to take the land back from Lanka Realty to prevent a threat to her husband's five-star hotel.
Lanka Realty is of the view that the SLTDA was willing to provide them another chance subject to strict deadlines, despite the approved cabinet decision to give it to another investor, prior to the appointment of Fernando as the Chairperson.
"However, for reasons best known, the new appointment was not in favour for obvious reasons. Without entering into a discussion with the company, the SLTDA arbitrarily decided to terminate the contract," a spokesperson from Lanka Realty told The Sunday Morning Business.
Picking up on this, a couple of websites too had published several articles attacking Fernando for carrying out personal favours while being a state official.
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SLTDA Chairperson Kimarli Fernando[/caption]
However, Kimarli Fernando was not at the SLTDA when the then Cabinet of Ministers decided to lease the said land to One Nature in August 2019, as she was appointed as the SLTDA Chairperson in December 2019 by the current Government. Our sources claimed that this issue has not featured in a board level discussion since her appointment, which is when she would, if at all, get involved in a the process as the Chairperson.
Furthermore, the hotel Lanka Realty was intending to build on the said land a budget hotel, whereas Wild Coast Tented Lodge is a five-star facility and one of the three Relais and Chateaux hotels in Sri Lanka. One Nature is a Dubai-based hotel chain that has luxury safari camps in Tanzania targeted at high-end markets. Tourism industry insiders told us that a budget hotel would not pose a threat to an adjoining five-star hotel, but an international hotel chain like One Nature would.
Colombo District Judge Amali Ranaweera issued the enjoining order which is valid for two weeks. The case is set to be taken up again on 30 June 2020.
