Some of them have announced plans to take legal action against the decision, while others threatened to demolish their projects.
The municipality plans to increase rent by up to 400 percent, according to a report in Al-Eqtisadiah business daily.
Municipality sources attributed the decision to revise rents to the expiry of a 20-year contract signed with investors.
However, investors say that they are entitled to run the facilities for a period of 25 years as per the law.
There are more than 100 investors who implemented real estate projects on leased municipal lands on the Corniche. They each contributed between SR600,000 and SR10 million.
They firmly opposed the municipality’s move to invite bids to run some of these facilities under the revised rent structure.
The investors noted that there had been a series of disputes between them and the municipality over the past 20 years and this had a negative impact on their investments and revenues as well.
Fahd Al-Homaidi, who invested in a recreation project on the Corniche, said the municipality had no right to impose a measure contrary to public interest and to those of investors.
“The Municipality’s decision is unfair. This will force us to approach the court for the second time, seeking justice,” he said, adding that the move would deal a severe blow to their investments. He recalled that the municipality had tried to impose a huge hike in rent 10 years ago.
“We then approached the Court of Grievances against the move, and secured a favorable verdict. The court annulled the municipality’s decision and upheld our right to run the projects as per the contract signed earlier,” he said.
Al-Homaidi also refuted claims from the Eastern Province’s mayor that the municipality had not increased rent for investors of these leased projects on the Corniche for 20 years.
“This claim is not correct. The municipality had increased rent by up to 50 percent twice over the past 20 years. We obeyed the decision and started implementing the revised rates,” he said.
Al-Homaidi also said they were allowed to demolish their structures as per their contracts with the municipality and would do so if the decision to raise rent stood.
He added that there was also another provision in the contract that prevented the municipality from reclaiming the property or evict an investor unless the government wanted to implement its own projects. Under the provisions of the contract, the municipality is also not entitled to invite fresh bids for an existing project to new investors, he said.
Al-Homaidi claimed investors had incurred huge losses due to the implementation of a municipality order three years ago to shut down all cafes serving shisha, which reduced their revenues by up to two-thirds.
According to Fahd Al-Homaidi, some investors who had pumped huge amounts of money in projects on the waterfronts had to wait up to 12 years to complete them and have only now managed to claim back their investments in revenue. Anwar Al-Motairy, who has run a project on the Alkhobar seafront for 20 years, underlined the need for a permanent solution to problems arising between the municipality and investors.
He said a possible resolution could involve the municipality selling the property to investors in accordance with existing market rates. Affected businessmen have urged the municipality to assess the value of their investments in projects potentially affected by the authority’s decision and give them compensation.
Municipality sources said the decision to increase rent would be applicable only to restaurants on the Corniche at the moment.
“The municipality will invite public bids to rent out the restaurants on Dammam and Alkhobar Corniche. There will not be any negotiations with the investors in this respect,” said one source.
“They can also take part in the bidding process and the revised rent, incorporating an increase of 400 percent, will also be applicable to them. A committee will fix the rent of each property after assessing their value.”
