DPL: Alter City Group violated lease agreement

Teresita A. Santos

The Department of Public Lands has determined that the Macau-based Alter City Group Inc., which acquired a lease of a 152-hectare public land for its proposed $360-million casino resort project on Puntan Diablo on Tinian, failed to submit evidence of its financing source for the project, as well as comply with other terms and conditions of its lease agreement.

DPL Secretary Teresita A. Santos issued last June 9 a notice of default and notice of violation to Johnny Leong, who is the corporate representative of Alter City Group, for failing to comply with the terms and conditions of lease agreement which was executed on Sept. 25, 2014.

According to the notice, a copy of which was obtained by Saipan Tribune yesterday, Santos gave Alter City Group 60 days to cure the breaches of the lease agreement, or else the lessee shall automatically be in default of the lease and all of its rights under the lease are terminated.

Among the required corrective actions is to complete in the 60-day Phase 1 of the project, which is the construction of a 500-room Plumeria Golf & Casino Resort, including 150 corporate villas, an 18-hole international golf course, a clubhouse with driving range facility, a medical center, farmer’s market, training center, retail services, conservatory, and staff dormitories.

Santos also informed Alter City Group that it has failed to pay $68,000 in rent to DPL for the period from Nov. 1, 2022 to Oct. 31, 2023.

DPL has used $68,000 of the lessee’s $300,000 security deposit and applied it to the company’s account to pay for unpaid advance annual rent due for that period.

Alter City Group was given 30 days to remit to DPL its payment of $68,000 to replenish the required $300,000 security deposit.

The secretary noted that the lease provides that Alter City Group agrees that within six months from the date of the lease, it will submit to DPL evidence of its sources of financing for the proposed development of a first-class hotel villa resort complex and associated amenities. On May 9, 2016, DPL issued a notice of default for Alter City Group’s failure to comply with this financing requirement.

Santos said during subsequent discussions, Alter City Group indicated that a performance bond from China Construction was forthcoming.

On March 1, 2017, DPL notified Alter City Group that the department would conditionally waive the company’s failure to comply with the financing requirement until Oct. 31, 2017.

Santos said such waiver was subject to Alter City Group’s execution of a lease agreement amending the financing requirement provision to require the company to submit to DPL evidence of its source of financing within 36 months of approval of the land lease by the Legislature. Santos said it is unclear whether this amendment was ever executed.

However, she said, on Sept. 13, 2018 DPL gave the company until Sept. 30, 2018, to submit documentation of its source of financing. The secretary said the lessee failed to submit the required evidence by the deadline.

With respect to other failures, Santos said Alter City Group failed to submit its required CNMI monthly Business Gross Revenue Tax monthly return; failed to secure all required permits; and failed to submit complete construction plans and specifications.

She said the lessee also failed to complete the required construction; failed to submit the required financial statement; failed to meet the required public benefit obligation; failed to close a dump site on Tinian; failed to construct a monumental statue; and failed to maintain insurance.

Santos said in order to cure lessee’s breach of the lease and to avoid default, the company must complete all of those requirements.

Alter City officials issued a check in the amount of $664,000 during the preliminary land lease signing agreement last Sept. 25, 2014. The check represented $300,000 security deposit and $340,000 in advance land lease rent.

The land lease agreement between Alter City Group and DPL calls for an initial 25-year lease with the option to extend for 15 more years.

The three-phased project was supposed to include the construction of 1,000 hotel rooms, water parks, an 18-hole golf course, villas, casino facilities and related tourism amenities, to be completed within 12 years.

In October 2014, the Senate and the House of Representatives unanimously approved during a joint session the public land lease agreement between the Alter City Group and DPL.