Bambalapitiya flats redevelopment project:
Promoter conceals information from Govt.



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Bambalapitya flats


By C. A. Chandraprema


 


In an article titled, "Bambalapitiya Flats redevelopment project: Govt. taken for a right royal ride?" published on 3 February 2017, we highlighted certain concerns about the Bambalapitiya flats redevelopment project. The Singapore registered company promoting this project UTL Global Projects Pte Ltd is a nominal company with no real estate or construction expertise or the financial resources to be able to take on a project of this magnitude. This company had misled the government into thinking that they had brought in a large Indian government owned construction conglomerate Engineering Projects India Ltd as their partner to both finance and build the project but in actual fact Engineering Projects India Ltd was not a shareholder of City Square Projects Pvt Ltd, which was formed in terms of BOI requirements, to execute the Bambalapitiya flats redevelopment project.


One of the main concerns raised in that article was the possibility that the project promoter was trying to raise money by pledging the Bambalapitiya land as collateral. With no proper financial commitment from Engineering Projects India Ltd, there was no one to finance the project. Following this expose, the Chairman of the Project Steering Committee of the Bambalapitiya flats redevelopment project at the Ministry of Housing and Construction wrote to Prashanth Koorpathi of UTL Global Projects Pte Ltd on 3 February 2017, drawing his attention to the questions raised by The Island and requesting answers. Prashanth Koorapati of UTL Global Projects Pvt Ltd now signing as a Director of City Square Projects Pvt Ltd, wrote back to the Chairman of the Project Steering Committee on 6 February 2017 pointing out that:


a) City Square Projects Pvt Ltd does have a consortium agreement with Engineering Projects India Ltd which had been signed on 5 March 2016.


b) UTL Global Projects Pte Ltd owns City Square Projects Pvt Ltd through its holding company named Centennial Holdings Pte Ltd Singapore.


c) Engineering Projects India Ltd will take up equity in City Square Projects Pvt Ltd after applying for the required permission from the government of India. Till then they will continue to develop the project as a consortium.


d) As stated in the agreement to be signed between NHDA and the Consortium, they were committed to bring in 40 Million USD into the City Square Projects Pvt Ltd account in Sri Lanka before the owners vacate the project land.


e) The total project is estimated to cost 500 Million USD, which needs to be developed with funding from financial institutions.


f) They have not pledged or mortgaged the land.


 


Allegations confirmed


In this letter Koorapati of UTL Global Projects Pvt Ltd has, in effect, admitted that Engineering Projects India Ltd is not a part of City Square Projects Pvt Ltd. According to the requirements of the BOI, both UTL Global Projects Pte Ltd and Engineering Projects India Ltd should have been the joint owners of City Square Projects Pvt Ltd, the locally registered company, to which the Bambalapitiya land will be transferred on a 99-year lease. That this requirement has not been fulfilled is a clear violation of BOI rules. This letter also reveals that Engineering Projects India Ltd which is an Indian state owned entity has not yet got the required permission for this project from the relevant Indian governmental agencies including the Indian cabinet and the Reserve Bank of India.


It was back in 30 December 2014 that Vinoo Gopal the Director Projects of Engineering Projects India Ltd wrote to the NHDA that they were in the process of completing the required documentation in relation to this project. More than two years have gone by and nothing has happened. There is no guarantee that Engineering Projects India Ltd will get the Indian government’s permission for this project. Even Megapolis and Urban Development minister Champika Ranawaka has filed a Cabinet Observation bearing Ministry Reference 2015/MPD/Obs 06 stating among other things, that a proper feasibility study has not been carried out to ascertain the viability of this project. Will the Indian government give their approval for a project which does not have even a proper feasibility study?


If Engineering Projects India Ltd does not get the necessary clearances from the Indian government, City Square Projects Pvt. Ltd which is a wholly owned subsidiary of UTL Global Projects Pte Ltd which in turn is owned by three Indian nationals, will be left owning a 99-year lease over the 10 acre land in Bambalapitiya without paying a cent to the government. There is something seriously fishy in this whole business. In the above mentioned letter to the Chairman of the Steering Committee, City Square Projects Pvt Ltd has said that they have not pledged or mortgaged the land. They haven’t done so because the land has not been transferred to them yet. But the moment the land is transferred to them, that is exactly what is going to happen.


A local bank has expressed willingness to provide an overdraft facility of 25 million USD to City Square Projects (Pvt) Ltd for the construction of residential towers in Colombo 4. The security that the bank will retain against the money advanced will be a mortgage over the ‘project assets’ which is in effect the Bambalapitiya land which is to be transferred to City Square Projects (Pvt) Ltd by the NHDA.


In the letter that Prashanth Koorpathi has sent to the Chairman of the Project Steering Committee he has claimed that they do have a consortium agreement with Engineering Projects India Ltd signed on 5 March 2016. He has even provided a redacted version of this consortium agreement for the perusal of the Project Committee stating that the rest of it is ‘highly confidential’. Any consortium agreement for the redevelopment of the Bambalapitiya flats should have been formed between UTL Global Projects Pte Ltd and Engineering Projects India Ltd as per the requirements of the BOI. The General Manager of the NHDA wrote to both these parties on 19 April 2016 telling them to jointly register a company to execute the project.


 


The disappearing 300 million USD


The BOI agreement that was signed on 22 June 2016 said that the project would be a joint venture between UTL Global Projects Pte Ltd and Engineering Projects India Ltd. Even the agreement that is to be signed between City Square Projects (Pvt) Ltd and the NHDA is based on the premise that UTL Global Projects Pte Ltd and Engineering Projects India Ltd had jointly formed City Square (Pvt.) Ltd. Now, Koorpathi of UTL Global Projects Pte Ltd has admitted in his letter that City Square Projects (Pvt) Ltd is a wholly owned subsidiary of UTL Global Projects Pte Ltd with Engineering Projects India Ltd not being a part of it.


It should be borne in mind that UTL Global Projects Pte Ltd, is just three members of the same family of Indian nationals Koorapati Premalatha Rani, Meena Pooja and Prashanth Koorapati; with no background in construction or real estate development or the financial resources to be able to handle a project of this nature. It is to a subsidiary wholly owned by them that the Bambalapitiya land is to be transferred. The claim put forward now is that even though Engineering Projects India Ltd does not have a consortium agreement with UTL Global Projects Pte Ltd, they do have an agreement with its wholly owned subsidiary City Square Projects (Pvt) Ltd. Firstly, that is procedurally wrong. The consortium agreement should be between UTL Global Projects Pte Ltd and Engineering Projects India not between Engineering Projects India Ltd and City Square (Pvt.) Ltd.


Secondly and most importantly, what exactly has Engineering Projects India Ltd undertaken to do in terms of this agreement with City Square Projects (Pvt) Ltd? The BOI, the NHDA, the present residents of the flats and the Housing and Construction Ministry may be under the impression that Engineering Projects India Ltd has undertaken to invest 300 million USD in this project because Vinoo Gopal the Director Projects of Engineering Projects India Ltd wrote to the NHDA on 20 December 2014 expressing their interest in the project and provided a reference from the Indian Overseas Bank and stating that Engineering Projects India Ltd had the finances to be able to complete the proposed 300 million USD project if it was awarded to them.


The fact that Koorpathi has sent only a redacted version of the agreement between Engineering Projects India Ltd and City Square Projects (Pvt) Ltd to the Project Steering Committee claiming that the rest of it was ‘highly confidential’ points to another bid to mislead and deceive the government of Sri Lanka. From this redacted version, Koorpathi has excluded the most important part which gives details of the financial commitment made by Engineering Projects India Ltd to this project. In his letter of 6 February 2017, Koorpathi has said that Engineering Projects India Ltd will take up equity in City Square Projects Pvt Ltd after applying for the required permission from the government of India, but without mentioning the amount committed. Why this reluctance to reveal the amount and nature of the financial commitment made by Engineering Projects India Ltd?


The redacted version of the consortium agreement states that Engineering Projects India Ltd will ‘endeavour’ to find a third party to provide the working capital for the project. That does not amount to a financial commitment. When this project proposal was going through the BOI and the NHDA processes, there was no talk of an unspecified third party who would be providing the money for the project. The government of Sri Lanka was all along obviously under the impression that Engineering Projects India Ltd will contribute at least 300 million USD to the project in accordance with the letters provided to the NHDA back in December 2014. However the actual commitment made by them in the agreement signed on 5 March 2016 is being concealed from the government of Sri Lanka. The government of Sri Lanka should find out why these details are being withheld. They may be in for quite a surprise.


Hiding information from govt.


The most important part of the project is the finances. If the money is available, architects, engineers and contractors can be hired and the project completed. But, Koorpathi’s letter to the Project Steering Committee clearly indicates that despite their claim that Engineering Projects India Ltd is involved in the project, neither party still knows where the money for the project is going to come from. They have mentioned that the money will have to be raised from third parties but no such third parties have been identified yet. That can’t be the proper way to go about a project of this nature. Koorpathi has said that they will bring USD 40 Million into the City Square Projects Pvt Ltd account in Sri Lanka before the owners vacate the project land. There is little doubt that they will raise this USD 40 million the same way they sought to raise 25 million USD from the local bank as mentioned earlier.


If this project fails, the promoter will disappear, unknown foreign and local third parties will be left in possession of the Bambalapitiya land for 99 years and the residents of the present Bambalapitiya flats and the government of Sri Lanka will be left high and dry. The promoters would have mortgaged government owned land without paying a cent to the government of Sri Lanka. The government of Sri Lanka should therefore reconsider this project. All agreements entered into by the BOI and the NHDA with UTL Global Projects Pte Ltd or its wholly owned subsidiary City Square Projects (Pvt) Ltd should be suspended and reviewed because they have clearly attempted to deceive the government of Sri Lanka without disclosing material facts.


The government of Sri Lanka should insist on seeing the whole consortium agreement signed between City Square Projects Pvt. Ltd and Engineering Projects India Ltd on 5 March 2016. How can there be ‘confidential matters’ which the government of Sri Lanka should not see in an agreement between two foreign companies when they are to get 10 acres of the best land in Colombo on a 99-year lease without paying the government any money by virtue of that very agreement? Besides, the Bambalapitiya land is public property. It has to be stated most emphatically that even if further letters from Engineering Projects India Ltd are produced, or an official from that company turns up in person to sign documents in Colombo, that means nothing because Engineering Projects India Ltd has not made any worthwhile financial commitment in their agreement with City Square Projects Pvt. Ltd.


It should be noted that Koorapati’s letter of 6 February 2017 to the project Steering Committee has stated that any involvement of the Engineering Projects India Ltd will be completely dependent on the Indian government granting them the necessary clearance for this project. If the Indian government does not give Engineering Projects India Ltd permission to go ahead with the project they will drop out of it automatically and through ownership of UTL Global Projects Pte Ltd which wholly owns City Square Projects (Pvt) Ltd, three individuals, Koorapati Premalatha Rani, Meena Pooja and Prashanth Koorapati will be left holding a 99-year lease on 10 acres of land in Bambalapitiya without paying a cent to the government. It is absolutely vital that the government should see the entire agreement that was signed between City Square Projects Pvt. Ltd and Engineering Projects India Ltd on 5 March 2016. The bottom line is that funding for the project should be available upfront before any approvals are granted or the land handed over.


 


 


 
 
 
 
 
 
 
 
 
 
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