Buildings under construction in Cocobay Da Nang. Photo courtesy of Empire Group.
Empire Group has informed its 1,700 buyers that it will stop paying them the 12 percent annuity from next year. When selling the project in 2016, it had promised to pay at least 12 percent of the cost of units for eight years, a rate considered unusually high at the time.
The company is offering some alternatives to owners. They could either pay 15 percent of their investment to turn their condotel into an apartment and live there or lease it out and sign a new contract with Empire to accept a return of 80 percent of profits from rentals.
The company chairman, Nguyen Duc Thanh, said the financial crisis for Cocobay Da Nang started in August 2017 and worsened since due to legal obstacles faced by condotels.
Banks did not provide credit due to the legal challenges, contractors started to pull out of the project and foreign partners also ceased their partnership with the group.
Cocobay is a 51-hectare hospitality and entertainment complex in Ngu Hanh Son District, Da Nang City. Construction began in 2016 at a cost of around $5 billion.
Empire had planned to build 10,000 three- to five-star rooms, but has so far built only 3,000.
It has been reporting losses since 2017, accumulating VND134 billion ($5.78 million) as of last year. It has debt obligations of VND10.17 trillion ($438.6 million).
It was a similar story at the Bavico condotel project in Nha Trang. In 2015 the developer of the project, promised to pay buyers 15 percent a year, but has not so far. Buyers have taken to the streets with banners many times to protest, demanding payment, but without success.
In the first half this year 11,855 condotel units came into the market, but only 25 percent of them were bought, according to the Vietnam Association of Realtors.