JEDDAH, 14 April 2005 — The Saudi Monetary Agency (SAMA) has frozen the bank accounts of the Venice Islands real estate investment project, according to a source at SAMA.
“We have received notice from the Ministry of Finance two days ago to freeze the project’s accounts,” a source at the deputy director’s office told Arab News. When asked about the reasons, he said that SAMA is only an executive agency, its role is to execute orders and he has no information on the circumstances and background for the order. At the Ministry of Finance, the minister’s office would not provide any details. This, however, marks a new approach in dealing with investment projects in order to prevent a possible scam because it has happened before with similar projects where shares are sold to investors but while the project is being approved the money collected is used by the developer in other businesses inside or outside the country and is no longer available for the initially proposed project thus leaving it hanging. The purpose of freezing the account is to secure investor’s money from foul play.
In the mean time, the Higher Committee for the Development of Makkah Region is continuing in its evaluation of the project for approval, according to its public relations office. As for the Jeddah Municipality, it has not yet received the plans for the projects and the necessary documents to process the permit.
There has been no official statement from SAMA yet about freezing the bank accounts and the Duraibi Group, the project’s real estate developing company, is denying that their account was frozen. According to Asharq Al-Awsat, a sister publication of Arab News, the Duraibi Group IPO centers have closed the selling of shares at SR2 billion and that SAMA has requested the group to close all of its investment accounts in order to unify them in one account and be able to monitor the dispensing of the investor’s funds. Arab News tried to reach the Duraibi Group for clarification with no success.
The Ministry of Commerce on the other hand was quoted by Asharq Al-Awsat as saying that the ministry has not recorded any illegal activity by the group in terms of investment in the Venice Islands project and that it was licensed for that in January after confirming land ownership through the Ministry of Justice and the Jeddah Municipality.
Arab News reported last week that the Venice Island project in Jeddah’s southern corniche has not been approved by the High Committee for the Development of Makkah Region or by the Jeddah Municipality. Despite that the group has announced in the newspapers that it has sold shares of the project for the price of SR10,000 per share representing 101 square meters of land priced at SR96 per square meter.
Saleh Al-Duraibi, the group’s chairman, also announced that some investors have even already received a return on their investment. According to the Al-Duraibi’s announcements in the newspapers, the project costs between SR10 billion and SR15 billion and it includes residential, commercial and entertainment facilities over a 20 million square meter area at a strategic location close to the city with roads and highways connecting to it. Both the Higher Committee for the Development of Makkah Region and the Jeddah Municipality have made public announcements warning investors not to rush in buying the shares because the project does not have the final permits from them to be implemented. “The group has not provided us as yet of the plans and necessary documents to evaluate the project’s feasibility and process the permit,” said Ahmed Al-Ghamdi, assistant PR director at the municipality.
“The Group should not have been advertising for the project until it had the permit for it, but I don’t know how it managed to even get an 800 number from the Saudi Telecom without the permit,” Al-Ghamdi told Arab News.