For those interested, here is what Riverside developers sent the investors in Sonesta One Jaco Resort:
March 29, 2010
Dear Customer,
Over the course of the past year, a series of events have unfolded in the development of
the Sonesta Jaco Resort that are important for you to be aware of. Desarrollos Naturales
de Costa Rica SA “Desarrollos”, the Developer of the Sonesta Jaco Resort has made
great efforts to successfully complete the development of the project, taking seriously
the commitment to honor our end of the bargain with all of those who have graciously
invested their faith and treasure in the development of the Sonesta Jaco Resort.
Regrettably and despite our most asserted efforts, the project now finds itself in an
uncertain situation in which we have been forced to present a lawsuit against the banks
due to the events which are described hereafter.
Firstly, Desarrollos as the Developer and Administrator named by the Banks to develop
the Sonesta Jaco Resort we want to thank you for your support. We appreciate and are
very conscious of your pre sale deposits as per our contracts.
In 2007, Desarrollos negotiated a construction line of credit with the Central American
Bank for Economic Integration (CABEI) (in Spanish, Banco Centroamericano de
Integracion Economica (BCIE)) and Banco Lafise SA, for the construction of the
Sonesta Jaco Resort. Banco Improsa SA, another Bank, acts as the Administrator
Trustee holding all the properties as guarantee for repayment of the loan and also acting
as Administration Trustee to assure the completion of the project. CABEI is a Bank
owned by all the Central American countries and as the largest bank in Central America
we were very pleased to contract this loan with them. Lafise and Improsa are smaller
regional commercial banks which work together with CABEI.
In this Trust agreement at Banco Improsa it was established that:
1. Desarrollos acting with legal powers from the Trustee and the Banks would
design, build, sell and act with the powers of the Trust and on behalf of the
Trusts at Banco Improsa SA. I attach a Transcription of clause XIV of the loan
and Trust contracts which accords us power to subscribe purchase options and to
pre sell project properties in name and in behalf of the Trust which as trustee
owns all the project properties.
2. Purchase option contracts are signed by Desarrollos on behalf of and for the
account of the Banks, the Trust and the Trustee, Banco Improsa SA. They are
binding for the Banks and the Trusts as your money was registered with the
Trustee who has certified this money was received and invested in the project.
Therefore as a customer you have the guarantee that all Purchase Options for the
purchase of Condos were authorized by Desarrollos for and in behalf of the Banks and
the Trustee, Banco Improsa SA. who accepted them, and who in turn holds all condo
properties in Trust.
That, in plain terms, means that Banco Improsa owns the property in Trust and we
signed the Purchase Options on their behalf and deposited the funds in their account.
All of this process, the project and the use of the proceeds, was supervised, controlled
and certified by the Bank Inspectors. Thus your property rights are duly protected.
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Additionally the Purchase Option for your unit has been annotated in the Property
Records in the Public Registry of Costa Rica in order to protect your right to purchase
the condominium once it is completed. It also means that any third party must recognize
your purchase option and rights in any eventuality. The contract signed by Desarrollos
Naturales de Costa Rica with you is legally binding to the Trustee Banco Improsa SA,
CABEI and Banco Lafise. This certification was presented in Court and a copy is
available to your lawyer in the Civil Court in Puntarenas under Record Preventive
Measure 10-1000082-0642-CL
Throughout the construction phase, the Banks have controlled the use of funds in the
project through an Independent Construction Supervisor chosen by the Bank, and The
Trustee Bank that controlled all disbursements of moneys to the project as have our
external auditors, our construction project management company as well as the
Developer acting as Agent for The Trust.
The Independent Bank appointed inspectors and the Trust confirm through their
controls that:
a. The construction is 84% complete.
b. All funds including loans, customer moneys and developer investments
have been properly invested in the construction .This is confirmed in the
certifications issued by the accountants, inspectors, auditors and
supervisors of the project
c. All customer deposits have been received by the Trust account at Banco
Improsa and the moneys have been accounted for in the project as per
the previously mentioned certification.
d. That the project value is much more than the money invested in it and
that the construction contracts were executed in good terms with very
good companies contracted to do the work and they have done an
excellent job.
Our relations with the Banks as we constructed 84% of the project were excellent. We
met all the contracted loan terms and parameters and the project was looking to be a
great success for the customers and the developers.
All of this started changing in mid 2008, although we did not realize it till 2009. In Mid
2008 CABEI- which because of its ownership structure is a political Bank- changed its
local Country Manager and appointed a Manager with a different business background
which significantly delayed the project. The new Country Manager proceeded to
change all the account managers and supervisors involved with the project and to
replace them with people who were not familiar with the project.
During 2008 CABEI delayed for 5 months the authorization for the Trustee to sign the
Condominium Conversion document needed (although the contract instructed the
Trustee that if the Bank did not decide in 15 days it should be automatically signed by
the Trustee) so we could have individual Condo properties recorded in the Public
Registry to be able to do closings and receive the money needed – and planned – to
complete the project and commence repaying the construction loan..
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When Condo Property Titles were finally issued by the Public Registry in January 2009
we hastened to commence closings with customers in order to start amortizing our bank
debt with the proceeds and with the balance to continue constructing the remaining
16% of the project and particularly the Condo hotel which we hoped to open -and so
did the Sonesta Hotel Chain- by Easter of 2009.
At this point the project was 75% sold, construction was 84% completed, close to 100
condos nearly ready for delivery, we were the only luxury hotel being finished in the
area as the new road was being built (and it was finally opened in February 2010
reducing the drive from the Airport to 1 hour instead of 2 hours), we were meeting our
obligations with the bank. Success was at our finger tips. We had dodged the financial
crisis bullet.
On January 27, 2009, after having made our first closings, we received a surprise email
from our CABEI loan officer indicating that the bank unilaterally, in violation of our
contract and with no explanation or reason was accelerating our loan by increasing 35%
the amount to be amortized to the bank loan from every closing, which by the way was
ratified by the bank during the condominium conversion just 3 months earlier.
CABEI (Lafise was not taken into consideration and the Trustee Bank simply stood in
the sidelines violating their fiduciary duty), disregarding what was contracted, insisted
in imposing their conditions and accelerating the repayment schedule. In return they
offered to increase our construction loan, which we would have preferred not to do, in
order to cover the shortfall created by their accelerated repayment schedule. They also
proposed new conditions, new controls and changes as a condition for this loan
increase. After 2 months on our knees, with suppliers and key personnel leaving the
project, customers getting uncomfortable and Sonesta pressuring us, we relented.
At the end of March 2009 we signed an amendment to our loan contract with CABEI
accepting the conditions they imposed, including a 49% repayment acceleration, and in
return received the promise that they would take this credit increase to their board in
April and would disburse in May so we could receive the credit that had become critical
to finishing the project. We signed and were mislead by the Bank as we did not receive
the financing in the manner agreed to in this contract.
CABEI hired a new Supervisor that confirmed that the project status was as had been
stated. The new Supervisor urged CABEI to disburse the loan increase promptly.
CABEI made us hire an external company, LATCO (Latin American Title Company),
to call and verify –many of you got calls from LATCO- the moneys that you as
customers had deposited and were verified by the Trust and LATCO confirmed our
information. We were checked, controlled, audited and all the information was found to
be correct.
In the meantime, the months went by, our bills mounted, we kept putting money,
advancing construction and putting work into the project to keep it afloat while CABEI
kept on promising, every month, that they would soon disburse the loan.
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In order to find a solution to the impasse we worked out three different business
agreements with three different successive first class buyers in March, June and July
2009. These investors were willing to purchase the hotel portion of the project and
invest in it in order to pay off debt, get the hotel operating and get the project back on
its feet without depending on CABEI. CABEI did not authorize the Trustee, Banco
Improsa, which holds all the guarantees to finalize the transaction and Banco Improsa
illegally refused to allow us to sell our commercial property and land for Phase II
leaving us with no cash flow and pushing the project to the edge of failure, as bills
mounted, we lost our key personnel, customers and suppliers grew uncomfortable.
On January 26, 2010, 12 months after CABEI had paralyzed our project (whereas we
built 84 % of the project, the largest in Costa Rica, in 21 months!); CABEI finally
communicated the term sheet for the loan increase. The term sheet was substantially
different then what we had agreed would be the terms of the loan increase in March
2009 and subsequent documents.
The term sheet for the loan increase includes 20 new conditions which were not agreed
upon on March 2009 when the loan increase was negotiated. The terms include 7
committees run by CABEI to co-administer the project. It includes onerous $1 Million
commissions and other fees for the bank. It includes conditions which the Bank knows
can not be met. Disbursement conditions are uncertain. The term sheet includes a
requirement that we agree that the Bank can sell the project administratively, without
respecting the investments made by our customers and suppliers nor the moneys
invested by the developers, and without due process, “any time it finds an acceptable
buyer and we are in any default” (which they can easily cause with the control they
seek). And, by the way, the terms are non negotiable.
This term sheet unilaterally removes all rights, protection and remedies for Buyers and
Suppliers. This contract also would put us in violation of our management agreement
with Sonesta Hotels. This is simply not acceptable as it is in a completely different
ballpark then what we signed in March 2009.
This last Clause, which allows the Bank to sell the project without any due process, is
what worries us the most as we have no guarantee of stability for the rights of
customers, suppliers, as well as our own. According to this clause, the Bank could sell
the Project for just the loan balance – quite a deal- wiping out the equity of the buyerinvestors,
the suppliers and the developers.
The Bank’s intentions, its mentality and its lack of respect for our Customers
investments become crystal clear when the Bank says in one of its legal filings that
condo buyers are speculators.
For the protection of Buyers, Suppliers and Developers we have chosen to sue the
Banks and the Trustee according to pre-established procedures to guarantee your rights
as customers recuperate your investment and recuperate the moneys owed to supplier
and employees and to recuperate our investment.
The suit claims that, starting January 2009, as the project prepared to commence
closings, startup the hotel and commence repayment of construction loans, arbitrary
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actions of the Lenders and Trustee violated the terms of the contracts, blocking sales,
imposing abusive conditions and not fulfilling their commitments. The complaint
alleges the Lenders incurred in breach of contract, breach of good faith, improper
control, negligence, refusal to set a release price, and breach of fiduciary duty by the
counterparties that has caused the successful project to collapse.
A Binding Arbitration lawsuit was filed as required by the contract that the Banks
required us to sign in 2007. The 3 Judge Court is very efficient and prompt. The
Arbitration process in the Costa Rica Chamber of Commerce requires a final ruling in
155 working days so we expect the process to be prompt. We are convinced that we
have the law on our side.
Additionally we have filed a lawsuit, requesting Precautionary Measures, which have
been granted, preventing the Banks from foreclosing on the property and selling your
condos until the completion of the Arbitration Process (Civil Court in Puntarenas under
Record for Precautionary Measure 10-1000082-0642-CL).
Due to these delays we have received a termination letter from Sonesta Hotel
Corporation. However we have been advised that once the project starts up again they
are willing to revisit the situation.
We very much regret that the project that we all were enamored with, that we worked so
hard for and that in which we all invested so much, has turned into such a complicated
proposition. We tried to avoid going to the legal arena but the illegal, arbitrary and
irresponsible actions of the Banks have left no other option to protect our investments.
Please note that as explained at the beginning of this note, the TRUST and the
TRUSTEE, Banco Improsa SA, must respond to you for your investment and even
though they may tell you that you should go to the developers, the developers do not
control the assets, the payments made to the project were deposited in the Trust Account
and the trust has acknowledged receipt of these funds. The Developers signature in the
pre sale contracts is executed for and on behalf of the Trustee of the project Banco
Improsa (as per Article 643 of the Costa Rica Commercial Code). We are attaching a
copy of the Developer’s powers (official Spanish version and we are working on an
English version that will be sent shortly).
You have the following rights as a customer of the Trust at Banco Improsa SA “One
Jaco CABEI/Lafise/ 2007”:
1. You may request that Banco Improsa SA close the purchase of your unit
2. You may request Banco Improsa SA to honor your contract.
You may contact Banco Improsa at:
JORGE CALVO ZELEDON, Manager of the Trust Department at Banco Improsa
E-mail:
jcalvo@improsa.comTelephone (506) 2523-1500 Cell (506) 8871-8437 Fax (506) 2257-44-85
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If you feel you need to hire an attorney in Costa Rica to handle this matter please have
them contact us so we can explain the situation to them and help expedite this matter.
Please be assured that our lawsuit is designed to protect your interests as much as ours
and those of the other suppliers and creditors. We do hope for the best outcome for our
joint interests and you can be sure we will pursue all legal avenues to find a solution
which protects our common interests.
Personally, we are very sad and greatly lament that many years of hard work have been
jeopardized by the actions of Banks who have shown little respect for the efforts, time
and money of others. We are grateful for all our customers’ business and support.
We will continue to stand behind our commitments, acting in good faith. We are here to
help finalize this matter in the best way possible. The actions by these three Banks have
placed the project in an unfortunate position and we hope to resolve this matter quickly
in order to reach the best possible outcome for all the parties involved.
The events mentioned above are the current status and our best assessment of the
situation. We will be sending periodic updates of the legal procedures and will be
keeping you updated.
Regards,
Joshua ten Brink
General Manager
Desarrollos Naturales de Costa Rica SA
Tel: (506) 2208-6000
Fax: (506) 228-2772
Toll - Free USA 1-866-864-9859
