Danang investor forfeits licence

Viglacera is shifting its main business from tile supply to hotel development

The local government has officially taken away Viglacera Corporation’s planning permission rights to develop the $18 million project on a 8,400 square metre plot at the intersection of Hung Vuong and Phan Chau Trinh streets.
The Viglacera proposal outlined a complex with a four-storey shopping mall and a 23-storey office and hotel building, with meeting and recreation facilities of four-star standard.
The country’s biggest building material producer had claimed the property would reap an annual revenue of $5 million and post-tax profits of $1.23 million, while dividends would be paid to stake holders after the fourth year of operation.
Company deputy general director Nguyen The Cuong had hoped the property would represent an attractive investment opportunity since Danang was developing itself as the economic spearhead of central Vietnam.
However, the city has licensed projects in the past but developers’ lack of experience and capital make it unlikely that their plans will ever come to fruition.
Fears that Viglacera’s project may have been a similar case became a reality when the authorities discovered that hardly a brick had been laid on the plot of land. Plus, a year after plans were released no stake holders have invested in the project.
“The property market in Danang is still in the early stages of development and the purchasing power of local people is small,” said Cuong.
As a result, Cuong said, there would be more risks associated with the local market than in Hanoi or Ho Chi Minh City. Viglacera planned to set up a joint stock company to develop the property. Of the $18 million the project was expected to cost, it sought around $4.7 million from stake holders and the remaining 75 per cent from bank loans.
However, Cuong said it had been an enormous challenge to convince potential stake holders and banks to invest in the project.
The company initially intended to begin construction on the property in 2007, but Danang authorities were uneasy about the reluctance to implement the project and decided to reclaim the land for auction. The local government has also tightened its grip on another delayed property project. Last month, it threatened to revoke the development license for Australian-backed Riverview company to build a $28 million hotel in 74 Bach Dang, also due to a lack of progress.
The project, licensed 18 months ago, is to develop a five-star 220-room hotel with an additional 30 service apartments, restaurants and a fitness centre.
After the investors, who have invested almost $1 million to date on the project, convinced the authorities to let them off the hook, they were given a six-month grace period in which construction was required to begin.
The site where Riverview plans its hotel was previously let to another foreign-backed company’s hotel project licensed in 1997.
However, the land remained idle for years as the investors failed to source finances for the project.
Despite these other false starts in the city, Vina Mobi joint stock company has decided to seek authorities’ approval on their own project to build a large office and hotel complex on an area of 10,000 square metres in the city’s downtown area.
The building would have an electronic products supermarket, a mobile phone software training and application centre, and a market development centre in a 30-storey block, at a cost of $17 million to $25 million.
Vina Mobi Chairman Le Huy Hoang said the company wanted to be the first to develop a modern hotel and office complex in Danang.
The city at present does not have any large office buildings, except for several small hotel-cum-office complexes such as Datraeco and Cosevco Star in Tran Phu street, meaning businesses have to lease space in local residential houses or office buildings of local companies.