(DUBAI) Office rents in Dubai dropped by as much as 17 per cent in the second quarter as new supply put pressure on landlords, CB Richard Ellis Group Inc (CBRE) said.
About 240,000 square metres of commercial space became available in areas such as Al Barsha, Tecom C and Jumeirah Lakes Towers, Matthew Green, head of United Arab Emirates research at CBRE, said in a report yesterday.
Rates at the Dubai International Financial Centre (DIFC), a tax-free hub that's home to hundreds of companies, dropped by 7.5 per cent to 3,982 dirhams (S$1,481) a square metre when offered by DIFC authority and 2,690 dirhams to 3,014 dirhams when offered by private developers, according to CBRE.
Companies in Dubai have shed thousands of jobs since the onset of the global credit crisis, increasing office vacancy rates.
Available commercial space is set to increase by almost 80 per cent by the end of 2011, Colliers CRE plc said in May.
Dubai's economy shrank 2.5 per cent last year, according to preliminary government estimates.
Power delays are pushing back the completion of construction in the Business Bay development, reducing the amount of office space coming onto the market in the second half, according to CBRE.
Office supply is increasing by about 5 per cent per quarter in Dubai, mainly in areas including Port Saeed, Al Mamzar, Airport Road and Diyafa Street, according to CBRE.
The value of leases has dropped by 60 per cent since the mid-2008 peak, while prices slumped by 57 per cent and occupancy dropped to about 71 per cent from 90 per cent, according to property researcher Colliers International.
The total space available will rise to about 6.4 million square metres from about 3.6 million square metres at the end of 2009. -- Bloomberg
Source: Business Times, 29 Jul 2010
Showing posts with label Overseas Property - Dubai. Show all posts
Showing posts with label Overseas Property - Dubai. Show all posts
Thursday, July 29, 2010
Thursday, July 22, 2010
Lack of sales and auctions stalling Dubai recovery
Buyers unable to gauge how far prices have fallen during 2-year slump
(DUBAI) A dearth of Dubai home sales and foreclosure auctions is stalling a recovery because buyers aren't able to gauge how far prices have fallen during the market's two-year slump.
'There are very few transactions at the moment,' said Craig Plumb, head of Middle East research at broker Jones Lang LaSalle Inc. 'We are not going to see the bottom of the market until we see transactions through the foreclosure process.'
Home prices in the sheikhdom have dropped about 50 per cent from their peak two years ago and Credit Suisse estimates a further decline of as much as 20 per cent. Though at least 70 foreclosure cases have been filed under Dubai's 2008 mortgage law, none has resulted in the sheikhdom's first auction, said Jody Waugh, a partner at law firm Al Tamimi & Co.
'People are only going to buy if they believe the price is realistic,' Mr Plumb said.
Data provided by the Dubai Land Department is too incomplete to provide a valuable guide to selling prices, he said. The credit crunch prompted some Dubai property buyers to abandon investments and leave the country while others tried to renegotiate contracts after finding that they owed more than their property was worth.
Purchases fell about 80 per cent last year from the previous year, said Jesse Downs, director of research at Dubai-based Landmark Advisory. They increased 24 per cent in the first half of this year from a year earlier.
A dozen banks have filed foreclosures, mostly involving residential properties, since London-based Barclays plc won the first judgment at the end of last year, Ms Waugh said. His firm has secured about 12 rulings under the emirate's 2008 mortgage law and the same number involving Islamic mortgages.
The first auction is unlikely to take place before the end of the year, following a 'quiet' summer and the holy month of Ramadan set to start in mid-August, according to Deepak Tolani, an analyst at Al Mal Capital.
Auctions 'might help us get to the bottom faster since prices are likely to be considerably less than asking prices in the market now', said JP Grobbelaar, director of research and advisory at property consultant Colliers International. 'But I don't believe prices won't drop below what is achieved at auctions.'
Credit Suisse's estimate of a 20 per cent decline would take average prices to about 837 dirhams (S$313) a square foot, based on its June estimate of 1,046 dirhams. Deutsche Bank AG analyst Nabil Ahmed predicted a price of 850 dirhams by the end of this year. UBS AG analyst Saud Masud sees a drop to about 600 dirhams.
Colliers estimated in a May 9 report that 41,000 new homes would be put on the market by the end of this year. That will lead to 'significant oversupply' and downward pressure on prices, regional director Ian Albert said in the report.
Banks that have seized real estate outside of the foreclosure process have been reluctant to put properties up for auction, said Mohammed Sultan Thani, assistant director-general at the Land Department. Developers have preferred renegotiating repayment terms with customers to foreclosures.
'The majority of banks are not eager to sell properties through auctions because the prices fetched may drag the market down,' Mr Thani said. 'Many prefer to reach deals allowing them to rent the properties for a few years.'
Barclays's foreclosure case hasn't been implemented, Dubai- based Faisal Iqbal, head of secured lending for the bank in the United Arab Emirates, said by e-mail. The Land Department 'is in control of the sales process on the instructions of the Dubai courts', he said.
Foreclosure sales will only provide a reliable guide if prices are set at a realistic level, said Mr Tolani. In Dubai's last auction, which didn't involve foreclosures, only one of four properties listed was sold, according to Mr Thani. Minimum prices at auctions are usually set by the courts in consultation with the land department, which conducts the sales.
If a property doesn't sell, the court can reduce the minimum price over subsequent auctions, said Ms Waugh. However, by the time a new auction is scheduled, the market may have slipped further and the decreased price may still be too high to attract a buyer.
'You're constantly trailing a market that is declining and that most likely won't result in transactions for a while,' Ms Downs said. Dubai developers have renegotiated thousands of mortgages and extended payment schedules rather than face defaults that would cut off their cash flow. Though that slowed the decline in prices by limiting distress sales, it has prevented the market from reaching its natural bottom.
'People are holding on as much as they can, refusing to adjust to market realities,' Ms Downs said. 'It's delaying the inevitable. If people accept the reality faster, prices will come down faster and in a way recover faster as well.' - Bloomberg
Source: Business Times, 22 Jul 2010
(DUBAI) A dearth of Dubai home sales and foreclosure auctions is stalling a recovery because buyers aren't able to gauge how far prices have fallen during the market's two-year slump.
'There are very few transactions at the moment,' said Craig Plumb, head of Middle East research at broker Jones Lang LaSalle Inc. 'We are not going to see the bottom of the market until we see transactions through the foreclosure process.'
Home prices in the sheikhdom have dropped about 50 per cent from their peak two years ago and Credit Suisse estimates a further decline of as much as 20 per cent. Though at least 70 foreclosure cases have been filed under Dubai's 2008 mortgage law, none has resulted in the sheikhdom's first auction, said Jody Waugh, a partner at law firm Al Tamimi & Co.
'People are only going to buy if they believe the price is realistic,' Mr Plumb said.
Data provided by the Dubai Land Department is too incomplete to provide a valuable guide to selling prices, he said. The credit crunch prompted some Dubai property buyers to abandon investments and leave the country while others tried to renegotiate contracts after finding that they owed more than their property was worth.
Purchases fell about 80 per cent last year from the previous year, said Jesse Downs, director of research at Dubai-based Landmark Advisory. They increased 24 per cent in the first half of this year from a year earlier.
A dozen banks have filed foreclosures, mostly involving residential properties, since London-based Barclays plc won the first judgment at the end of last year, Ms Waugh said. His firm has secured about 12 rulings under the emirate's 2008 mortgage law and the same number involving Islamic mortgages.
The first auction is unlikely to take place before the end of the year, following a 'quiet' summer and the holy month of Ramadan set to start in mid-August, according to Deepak Tolani, an analyst at Al Mal Capital.
Auctions 'might help us get to the bottom faster since prices are likely to be considerably less than asking prices in the market now', said JP Grobbelaar, director of research and advisory at property consultant Colliers International. 'But I don't believe prices won't drop below what is achieved at auctions.'
Credit Suisse's estimate of a 20 per cent decline would take average prices to about 837 dirhams (S$313) a square foot, based on its June estimate of 1,046 dirhams. Deutsche Bank AG analyst Nabil Ahmed predicted a price of 850 dirhams by the end of this year. UBS AG analyst Saud Masud sees a drop to about 600 dirhams.
Colliers estimated in a May 9 report that 41,000 new homes would be put on the market by the end of this year. That will lead to 'significant oversupply' and downward pressure on prices, regional director Ian Albert said in the report.
Banks that have seized real estate outside of the foreclosure process have been reluctant to put properties up for auction, said Mohammed Sultan Thani, assistant director-general at the Land Department. Developers have preferred renegotiating repayment terms with customers to foreclosures.
'The majority of banks are not eager to sell properties through auctions because the prices fetched may drag the market down,' Mr Thani said. 'Many prefer to reach deals allowing them to rent the properties for a few years.'
Barclays's foreclosure case hasn't been implemented, Dubai- based Faisal Iqbal, head of secured lending for the bank in the United Arab Emirates, said by e-mail. The Land Department 'is in control of the sales process on the instructions of the Dubai courts', he said.
Foreclosure sales will only provide a reliable guide if prices are set at a realistic level, said Mr Tolani. In Dubai's last auction, which didn't involve foreclosures, only one of four properties listed was sold, according to Mr Thani. Minimum prices at auctions are usually set by the courts in consultation with the land department, which conducts the sales.
If a property doesn't sell, the court can reduce the minimum price over subsequent auctions, said Ms Waugh. However, by the time a new auction is scheduled, the market may have slipped further and the decreased price may still be too high to attract a buyer.
'You're constantly trailing a market that is declining and that most likely won't result in transactions for a while,' Ms Downs said. Dubai developers have renegotiated thousands of mortgages and extended payment schedules rather than face defaults that would cut off their cash flow. Though that slowed the decline in prices by limiting distress sales, it has prevented the market from reaching its natural bottom.
'People are holding on as much as they can, refusing to adjust to market realities,' Ms Downs said. 'It's delaying the inevitable. If people accept the reality faster, prices will come down faster and in a way recover faster as well.' - Bloomberg
Source: Business Times, 22 Jul 2010
Tuesday, June 29, 2010
Dubai house prices unlikely to recover before 2011
Residential and commercial property market hit by oversupply: report
(DUBAI) Dubai house prices are not seen recovering before 2011 at the earliest while oversupply in commercial property will boost vacancy rates to more than 50 per cent next year Jones Lang LaSalle said on Sunday. A total of 26,000 homes are expected to be completed in 2010 and 25,000 in 2011, bringing total residential stock to 320,000 homes by the end of 2011, up from 287,000 at the end of the second quarter, the property consultancy said in a report.
'Despite the recent stabilisation in pricing levels, Dubai's residential market will experience a situation of oversupply and prices are not expected to recover before 2011 at the earliest,' the report said.
'Finance is a key factor in market recovery. The residential market has shown signs of improved lending in 2010 as more banks are injecting liquidity into the mortgage market.' Dubai's once booming property sector collapsed in the wake of the global financial crisis, leaving developers and customers with huge debts and several major projects unfinished.
Average apartment rents fell 10 per cent in the second quarter from the same period a year ago, and were down 4 per cent from the first quarter this year. Average villa rents fell 23 per cent in the second quarter from the second quarter of 2009 and were down 11 per cent from the first quarter this year. Greatest declines were in the luxury and high-end for both categories, the report said.
Apartment prices remained stable while villa prices rose marginally over the quarter.
While Dubai's office market is expected to experience a supply overhang, there is still a shortage of good quality supply, the report said.
2010 represents the peak in new supply with 20 million square feet of supply expected, but only 25 per cent of that is currently complete and further delays are expected. -- Reuters
Source: Business Times, 29 Jun 2010
(DUBAI) Dubai house prices are not seen recovering before 2011 at the earliest while oversupply in commercial property will boost vacancy rates to more than 50 per cent next year Jones Lang LaSalle said on Sunday. A total of 26,000 homes are expected to be completed in 2010 and 25,000 in 2011, bringing total residential stock to 320,000 homes by the end of 2011, up from 287,000 at the end of the second quarter, the property consultancy said in a report.
'Despite the recent stabilisation in pricing levels, Dubai's residential market will experience a situation of oversupply and prices are not expected to recover before 2011 at the earliest,' the report said.
'Finance is a key factor in market recovery. The residential market has shown signs of improved lending in 2010 as more banks are injecting liquidity into the mortgage market.' Dubai's once booming property sector collapsed in the wake of the global financial crisis, leaving developers and customers with huge debts and several major projects unfinished.
Average apartment rents fell 10 per cent in the second quarter from the same period a year ago, and were down 4 per cent from the first quarter this year. Average villa rents fell 23 per cent in the second quarter from the second quarter of 2009 and were down 11 per cent from the first quarter this year. Greatest declines were in the luxury and high-end for both categories, the report said.
Apartment prices remained stable while villa prices rose marginally over the quarter.
While Dubai's office market is expected to experience a supply overhang, there is still a shortage of good quality supply, the report said.
2010 represents the peak in new supply with 20 million square feet of supply expected, but only 25 per cent of that is currently complete and further delays are expected. -- Reuters
Source: Business Times, 29 Jun 2010
Tuesday, June 15, 2010
Qatar may buy more overseas assets: JLL
(DUBAI) Wealth funds of gas-rich Qatar are likely to make further global real estate investments as prices in countries such as Germany decline, Jones Lang LaSalle said in a report on Sunday.
The funds 'are likely to be emerging as the new powerhouse in terms of global real estate capital flows in 2010', Fadi Moussalli, regional director at Jones Lang LaSalle MENA, said in the report.
'Cash-rich and with a strong appetite for splashy overseas assets, Qatari vehicles have lately outshined their counterparts from the region and are projected to carry on with their rapid expansion across the real estate world,' Mr Moussalli said.
The International Monetary Fund expects the Qatari economy to grow 18.5 per cent this year, far above estimates for the rest of the Gulf Arab region. Harrods Ltd, owner of the London luxury department store, was sold to Qatar Holding by Mohamed Al-Fayed last month. The price was £1.5 billion (S$3 billion), said two people familiar with the transaction.
Qatar is the largest shareholder in Songbird Estates plc, which controls more than half the buildings in the Canary Wharf estate in London, J Sainsbury plc, the UK's third-biggest supermarket owner, and Barclays plc, the UK's third-largest bank by assets. It's also the second- largest shareholder in London Stock Exchange Group plc and has a stake in Volkswagen AG, the German carmaker.
'Their ability to compete in this market will be increased by the decline in investment from German open-ended funds, which were among the major global investors in 2009,' Mr Moussalli said.
The German funds are likely to make fewer acquisitions government relations tighter, he added. -- Bloomberg
Source: Business Times, 15 Jun 2010
The funds 'are likely to be emerging as the new powerhouse in terms of global real estate capital flows in 2010', Fadi Moussalli, regional director at Jones Lang LaSalle MENA, said in the report.
'Cash-rich and with a strong appetite for splashy overseas assets, Qatari vehicles have lately outshined their counterparts from the region and are projected to carry on with their rapid expansion across the real estate world,' Mr Moussalli said.
The International Monetary Fund expects the Qatari economy to grow 18.5 per cent this year, far above estimates for the rest of the Gulf Arab region. Harrods Ltd, owner of the London luxury department store, was sold to Qatar Holding by Mohamed Al-Fayed last month. The price was £1.5 billion (S$3 billion), said two people familiar with the transaction.
Qatar is the largest shareholder in Songbird Estates plc, which controls more than half the buildings in the Canary Wharf estate in London, J Sainsbury plc, the UK's third-biggest supermarket owner, and Barclays plc, the UK's third-largest bank by assets. It's also the second- largest shareholder in London Stock Exchange Group plc and has a stake in Volkswagen AG, the German carmaker.
'Their ability to compete in this market will be increased by the decline in investment from German open-ended funds, which were among the major global investors in 2009,' Mr Moussalli said.
The German funds are likely to make fewer acquisitions government relations tighter, he added. -- Bloomberg
Source: Business Times, 15 Jun 2010
Tuesday, May 11, 2010
Oversupply of homes in Dubai to pressure prices
(DUBAI) The completion of a 'significant' number of new homes in Dubai later this year will further pressure prices that rose 2 per cent in the first quarter, Colliers International said.
Colliers, a global real-estate-services firm, estimates that 41,000 residential units will enter the market by the end of 2010, mostly in the low- to mid-income segments. House prices in the first quarter were on par with 2007 levels, rising on average to 1,061 dirhams (S$398.8) a square foot from 1,037 dirhams a year earlier, Colliers said in an e-mailed report on Sunday.
'There will be significant oversupply in the market by the end of the year, so it is anticipated the index will experience fluctuations in value going forward,' Colliers' regional director Ian Albert said in the report. 'Demand is not expected to match the growth in supply, creating downward pressure on property prices,' according to the document.
Dubai's property prices have slumped more than 50 per cent since their peak in mid-2008 as the financial crisis forced companies to dismiss workers. The market's collapse followed a construction boom that created thousands of homes just as demand began to evaporate.
Apartment prices in the emirate gained 6 per cent in the first quarter compared with the previous three months and villa prices rose 2 per cent while the cost of townhouses was down 4 per cent, Colliers' house-price index showed.
'Numerous' banks and mortgage providers increased the loan-to-value ratio to between 75 per cent and 90 per cent in the first quarter, according to Colliers. Some also lowered interest rates on mortgages to between 6.5 per cent and 8.5 per cent. -- Bloomberg
Source: Business Times, 11 May 2010
Colliers, a global real-estate-services firm, estimates that 41,000 residential units will enter the market by the end of 2010, mostly in the low- to mid-income segments. House prices in the first quarter were on par with 2007 levels, rising on average to 1,061 dirhams (S$398.8) a square foot from 1,037 dirhams a year earlier, Colliers said in an e-mailed report on Sunday.
'There will be significant oversupply in the market by the end of the year, so it is anticipated the index will experience fluctuations in value going forward,' Colliers' regional director Ian Albert said in the report. 'Demand is not expected to match the growth in supply, creating downward pressure on property prices,' according to the document.
Dubai's property prices have slumped more than 50 per cent since their peak in mid-2008 as the financial crisis forced companies to dismiss workers. The market's collapse followed a construction boom that created thousands of homes just as demand began to evaporate.
Apartment prices in the emirate gained 6 per cent in the first quarter compared with the previous three months and villa prices rose 2 per cent while the cost of townhouses was down 4 per cent, Colliers' house-price index showed.
'Numerous' banks and mortgage providers increased the loan-to-value ratio to between 75 per cent and 90 per cent in the first quarter, according to Colliers. Some also lowered interest rates on mortgages to between 6.5 per cent and 8.5 per cent. -- Bloomberg
Source: Business Times, 11 May 2010
Thursday, April 15, 2010
Dubai builder calls off deal with fund
Arabtec Holding, the Dubai construction giant that helped build the world’s tallest tower, is backing out of a deal that would have given an Abu Dhabi state-run fund a controlling stake.
Arabtec and Aabar Investments each announced they were scrapping the proposed US$1.74 billion deal in brief statements yesterday on local stock exchanges. No reason was given for calling off the tie-up, which would have given Aabar a 70 per cent stake in the builder. They left the door open to partnering in the future.
‘The parties have agreed they will work together in good faith toward further cooperation and forming a strategic partnership in Abu Dhabi in the future,’ the companies said.
Representatives for the two companies could not be reached for comment.
Arabtec’s balance sheet has been weakened by the global financial crisis and a severe property slump in its home market Dubai, where property values have plunged by half from their peak in 2008.
Plans for the deal with Aabar were floated in January amid a push for closer economic integration between struggling Dubai and the oil-rich federal capital Abu Dhabi.
Several Dubai state-linked companies that are laden with billions of dollars of debt and have scrambled to pay their bills are among Arabtec’s customers.
Although Arabtec is not owned by Dubai’s government, analysts say the indebted sheikdom is the company’s largest debtor. Some saw the deal with Aabar as a backdoor way for Abu Dhabi to aid Dubai by shoring up one of its biggest contractors.
Dubai’s government last month outlined details of a long-awaited restructuring plan for its struggling conglomerate Dubai World. That plan calls for a cash injection of up to US$9.5 billion and provisions for further payments to contractors such as Arabtec.
Roy Cherry, an analyst at Shuaa Capital in Dubai, said that gave Arabtec more options because it provided a framework for the company to be repaid.
‘The visibility of future cash flows increased and uncertainty has declined substantially,’ he said. ‘Dubai’s move raised Arabtec’s bargaining power, (and) the management realised this was no longer a good offer.’
Aabar is majority owned by the government of Abu Dhabi. It has become one of the sheikdom’s most active investment funds over the past year, making big investments in Mercedes-Benz maker Daimler, Richard Branson’s commercial space travel startup Virgin Galactic and Formula One champion team Brawn GP.
Arabtec is among Dubai’s best-known construction companies. It was one of the main contractors on the record-breaking Burj Khalifa, the world’s tallest skyscraper. It employs 52,000 workers, according to its website.
Source: Business Times, 15 Apr 2010
Arabtec and Aabar Investments each announced they were scrapping the proposed US$1.74 billion deal in brief statements yesterday on local stock exchanges. No reason was given for calling off the tie-up, which would have given Aabar a 70 per cent stake in the builder. They left the door open to partnering in the future.
‘The parties have agreed they will work together in good faith toward further cooperation and forming a strategic partnership in Abu Dhabi in the future,’ the companies said.
Representatives for the two companies could not be reached for comment.
Arabtec’s balance sheet has been weakened by the global financial crisis and a severe property slump in its home market Dubai, where property values have plunged by half from their peak in 2008.
Plans for the deal with Aabar were floated in January amid a push for closer economic integration between struggling Dubai and the oil-rich federal capital Abu Dhabi.
Several Dubai state-linked companies that are laden with billions of dollars of debt and have scrambled to pay their bills are among Arabtec’s customers.
Although Arabtec is not owned by Dubai’s government, analysts say the indebted sheikdom is the company’s largest debtor. Some saw the deal with Aabar as a backdoor way for Abu Dhabi to aid Dubai by shoring up one of its biggest contractors.
Dubai’s government last month outlined details of a long-awaited restructuring plan for its struggling conglomerate Dubai World. That plan calls for a cash injection of up to US$9.5 billion and provisions for further payments to contractors such as Arabtec.
Roy Cherry, an analyst at Shuaa Capital in Dubai, said that gave Arabtec more options because it provided a framework for the company to be repaid.
‘The visibility of future cash flows increased and uncertainty has declined substantially,’ he said. ‘Dubai’s move raised Arabtec’s bargaining power, (and) the management realised this was no longer a good offer.’
Aabar is majority owned by the government of Abu Dhabi. It has become one of the sheikdom’s most active investment funds over the past year, making big investments in Mercedes-Benz maker Daimler, Richard Branson’s commercial space travel startup Virgin Galactic and Formula One champion team Brawn GP.
Arabtec is among Dubai’s best-known construction companies. It was one of the main contractors on the record-breaking Burj Khalifa, the world’s tallest skyscraper. It employs 52,000 workers, according to its website.
Source: Business Times, 15 Apr 2010
Thursday, March 25, 2010
Dubai World set to present US$26b debt plan: sources
Debt-laden Dubai World will present plans to restructure its US$26 billion debt pile to creditors this week, with details due to emerge yesterday, sources familiar with the talks told Reuters.
The conglomerate, which has been locked in talks with its creditors, will discuss how it plans to repay its commitments with an informal bank panel, which represents 97 creditors to the state-owned conglomerate, in Dubai.
‘People will be looking for anything not already priced in (the market) such as a government guarantee,’ said Robert McKinnon, ASAS Capital’s chief investment officer.
The debt is linked mainly to Dubai World’s property units, Nakheel and Limitless World. The company ringfenced other key assets, such as ports operator DP World, from the restructuring.
Talks have tested the tolerance and positions of both sides with early reports floated about a ‘haircut’, or loss, as large as 40 per cent, while bankers have countered with demands for nothing less than full repayment.
A final proposal on the debt could involve tranches with different repayment profiles, one with a repayment over three to five years, with the principal discounted, and another with repayment over seven to nine years with no discount.
The eventual proposal will centre on the extension of maturities with low or zero interest, and the option of an early exit at a discount or eventual repayment over a longer period of time.
‘We now expect much better scenarios, an extension of the maturity date giving domestic banks some breath,’ said Rami Sidani, head of Mena at Schroders Investments.
He said that a ‘haircut’ would have had a ’severe impact’ on domestic banks and leave them in need of a capital injection from the UAE central bank. Moody’s estimated local banks have US$15 billion in exposure to Dubai World.
The quality of the offer rests with Abu Dhabi, Dubai’s wealthier and larger neighbour, which bailed the emirate out late last year.
‘It looks very much like the main scenario of Abu Dhabi bailout is taking shape,’ said David Butter, director for Middle East and North Africa, Economist Intelligence Unit.
‘I doubt that we will ever be able to get an authoritative figure on it, but the bottom line is that Abu Dhabi seems to have decided that it has to pay whatever is necessary to avoid serious reputational damage for the UAE as a whole.’
A Dubai government spokeswoman said on Tuesday that meetings with the core creditor committee, known as CoCom, were part of ‘an ongoing dialogue related to the restructuring process’.
The spokeswoman said that Dubai remains on track to present a formal proposal to creditors this month.
The panel includes Standard Chartered, HSBC, Lloyds, Royal Bank of Scotland, Emirates NBD and Abu Dhabi Commercial Bank, which, combined, are believed to have two-thirds of the total exposure.
Dubai said in November that it would ask creditors to delay repayment on US$26 billion in debt linked to its flagship conglomerate Dubai World, sending shockwaves through markets.
The last-minute lifeline from Abu Dhabi helped the glitzy Gulf Arab emirate, known for its tax free earnings and easygoing lifestyle, avert default on a US$4.1 billion Islamic bond linked to Nakheel.
‘For creditors, it would be music to their ears to know that Abu Dhabi is involved in any restructuring plan,’ said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
Source: Business Times, 25 Mar 2010
The conglomerate, which has been locked in talks with its creditors, will discuss how it plans to repay its commitments with an informal bank panel, which represents 97 creditors to the state-owned conglomerate, in Dubai.
‘People will be looking for anything not already priced in (the market) such as a government guarantee,’ said Robert McKinnon, ASAS Capital’s chief investment officer.
The debt is linked mainly to Dubai World’s property units, Nakheel and Limitless World. The company ringfenced other key assets, such as ports operator DP World, from the restructuring.
Talks have tested the tolerance and positions of both sides with early reports floated about a ‘haircut’, or loss, as large as 40 per cent, while bankers have countered with demands for nothing less than full repayment.
A final proposal on the debt could involve tranches with different repayment profiles, one with a repayment over three to five years, with the principal discounted, and another with repayment over seven to nine years with no discount.
The eventual proposal will centre on the extension of maturities with low or zero interest, and the option of an early exit at a discount or eventual repayment over a longer period of time.
‘We now expect much better scenarios, an extension of the maturity date giving domestic banks some breath,’ said Rami Sidani, head of Mena at Schroders Investments.
He said that a ‘haircut’ would have had a ’severe impact’ on domestic banks and leave them in need of a capital injection from the UAE central bank. Moody’s estimated local banks have US$15 billion in exposure to Dubai World.
The quality of the offer rests with Abu Dhabi, Dubai’s wealthier and larger neighbour, which bailed the emirate out late last year.
‘It looks very much like the main scenario of Abu Dhabi bailout is taking shape,’ said David Butter, director for Middle East and North Africa, Economist Intelligence Unit.
‘I doubt that we will ever be able to get an authoritative figure on it, but the bottom line is that Abu Dhabi seems to have decided that it has to pay whatever is necessary to avoid serious reputational damage for the UAE as a whole.’
A Dubai government spokeswoman said on Tuesday that meetings with the core creditor committee, known as CoCom, were part of ‘an ongoing dialogue related to the restructuring process’.
The spokeswoman said that Dubai remains on track to present a formal proposal to creditors this month.
The panel includes Standard Chartered, HSBC, Lloyds, Royal Bank of Scotland, Emirates NBD and Abu Dhabi Commercial Bank, which, combined, are believed to have two-thirds of the total exposure.
Dubai said in November that it would ask creditors to delay repayment on US$26 billion in debt linked to its flagship conglomerate Dubai World, sending shockwaves through markets.
The last-minute lifeline from Abu Dhabi helped the glitzy Gulf Arab emirate, known for its tax free earnings and easygoing lifestyle, avert default on a US$4.1 billion Islamic bond linked to Nakheel.
‘For creditors, it would be music to their ears to know that Abu Dhabi is involved in any restructuring plan,’ said Haissam Arabi, chief executive and fund manager at Gulfmena Alternative Investments.
Source: Business Times, 25 Mar 2010
Saturday, March 20, 2010
Dubai developer open to selling its assets: report
DUBAI’S Union Properties is willing to sell any of its projects if it receives a fair price, its chairman told UAE newspapers yesterday.
The third-largest developer in the Gulf Arab emirate has been hit by the global downturn, which has sent prices in Dubai’s once-booming property sector tumbling some 50 per cent from their peaks in 2008.
The developer has received offers for its Ritz Carlton hotel in Dubai which the debt-laden firm is hoping to sell for about 1.5 billion dirhams (S$570.8 million).
‘The company’s complete projects have achieved their investment targets, and it’s not strange that we offer them to investors for sale, particularly as we have giant projects under way,’ Khalid bin Kalban told the Arabic daily al-Bayan.
‘Buyers are mainly investment companies and individuals who are looking to buy complete and rented properties with an income of 7-8 per cent,’ he added.
In a separate interview with the UAE Arabic daily al-Ittihad, Mr Kalban said the funds raised from asset sales will be used to repay financial commitments and finance ongoing property projects.
The firm posted a third consecutive quarterly loss on provisions for contracting and property revaluation.
It has 6.5 billion dirhams of outstanding debt, of which 2.8 billion had been rescheduled for payment to 2011 from 2009, with the remainder maturing in the long term.
Source: Business Times, 20 Mar 2010
The third-largest developer in the Gulf Arab emirate has been hit by the global downturn, which has sent prices in Dubai’s once-booming property sector tumbling some 50 per cent from their peaks in 2008.
The developer has received offers for its Ritz Carlton hotel in Dubai which the debt-laden firm is hoping to sell for about 1.5 billion dirhams (S$570.8 million).
‘The company’s complete projects have achieved their investment targets, and it’s not strange that we offer them to investors for sale, particularly as we have giant projects under way,’ Khalid bin Kalban told the Arabic daily al-Bayan.
‘Buyers are mainly investment companies and individuals who are looking to buy complete and rented properties with an income of 7-8 per cent,’ he added.
In a separate interview with the UAE Arabic daily al-Ittihad, Mr Kalban said the funds raised from asset sales will be used to repay financial commitments and finance ongoing property projects.
The firm posted a third consecutive quarterly loss on provisions for contracting and property revaluation.
It has 6.5 billion dirhams of outstanding debt, of which 2.8 billion had been rescheduled for payment to 2011 from 2009, with the remainder maturing in the long term.
Source: Business Times, 20 Mar 2010
Thursday, March 18, 2010
Dubai property on rebound
Market will recover by end-2011, says developer of hotel, housing project
Dubai’s property market will recover by the end of 2011 as mortgages become easier to obtain and more people move to the city, according to the developer of a US$4 billion hotel and residential project.
‘Banks can’t stay away for long,’ Santhosh Joseph, 45, chief executive officer of Dubai Pearl, said in an interview. ‘They have to lend and, historically, most of this region’s lending goes into property.’
Dubai, the second-biggest sheikhdom in the United Arab Emirates, experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 per cent and project cancellations exceeding US$300 billion. To sustain itself, Dubai Pearl is relying on US$1.5 billion paid for apartments in advance and another US$500 million that has been committed by Al Fahim Group, Mr Joseph said.
‘We’re not expecting to sell substantially in 2010 and 2011. We are a zero-debt company but we may look into leveraging at a later date.’
Mr Joseph has a 20 per cent stake in Dubai Pearl while the rest is owned by a group of investors led by Al Fahim Group, one of Abu Dhabi’s wealthiest families.
Dubai Pearl is building four 73-storey towers connected by a single roof less than a mile from the emirate’s palm-tree shaped man-made islands. The project, which has the same name as the company, will have 20 million square foot of hotel and residential space.
MGM Grand, SkyLofts, Bellagio, and Baccarat are among the six hotels that will have 1,400 rooms. The main structure will be surrounded by an artificial beach and low-rise buildings containing malls and theatres. The project is scheduled for completion in 2013.
The property crisis prompted Dubai Pearl to review the project and add entertainment and health components to the design, Mr Joseph said. The company also renegotiated terms with buyers, such as longer payment schedules, to reduce the chance of defaults.
‘In 2010 and until the second half of 2011, I’m not expecting the international markets to be liquid or mortgages to be widely available,’ he said. ‘Real-estate cycles are usually three years peak-to-peak and the best locations tend to bounce quickly.’
Dubai Pearl is at the centre of a newly developed part of the city, surrounded by populated areas such as Palm Jumeirah, Dubai Media City and Dubai Internet City where international media and technology companies are based. The densely populated Dubai Marina is also nearby.
The project has the ‘best location with a captive clientele in a six-mile radius,’ Mr Joseph said. ‘Our area lacks communities where residents can walk from end to end.’
The company is selling residential space at 2,250 dirhams (S$854) a square foot, while furnished and serviced Baccarat-branded apartments are selling starting at US$1,000 a square foot. The prices have been slashed by about 30 per cent, he said.
Source: Business Times, 18 Mar 2010
Dubai’s property market will recover by the end of 2011 as mortgages become easier to obtain and more people move to the city, according to the developer of a US$4 billion hotel and residential project.
‘Banks can’t stay away for long,’ Santhosh Joseph, 45, chief executive officer of Dubai Pearl, said in an interview. ‘They have to lend and, historically, most of this region’s lending goes into property.’
Dubai, the second-biggest sheikhdom in the United Arab Emirates, experienced the world’s worst property slump during the global recession, with selling prices falling by more than 50 per cent and project cancellations exceeding US$300 billion. To sustain itself, Dubai Pearl is relying on US$1.5 billion paid for apartments in advance and another US$500 million that has been committed by Al Fahim Group, Mr Joseph said.
‘We’re not expecting to sell substantially in 2010 and 2011. We are a zero-debt company but we may look into leveraging at a later date.’
Mr Joseph has a 20 per cent stake in Dubai Pearl while the rest is owned by a group of investors led by Al Fahim Group, one of Abu Dhabi’s wealthiest families.
Dubai Pearl is building four 73-storey towers connected by a single roof less than a mile from the emirate’s palm-tree shaped man-made islands. The project, which has the same name as the company, will have 20 million square foot of hotel and residential space.
MGM Grand, SkyLofts, Bellagio, and Baccarat are among the six hotels that will have 1,400 rooms. The main structure will be surrounded by an artificial beach and low-rise buildings containing malls and theatres. The project is scheduled for completion in 2013.
The property crisis prompted Dubai Pearl to review the project and add entertainment and health components to the design, Mr Joseph said. The company also renegotiated terms with buyers, such as longer payment schedules, to reduce the chance of defaults.
‘In 2010 and until the second half of 2011, I’m not expecting the international markets to be liquid or mortgages to be widely available,’ he said. ‘Real-estate cycles are usually three years peak-to-peak and the best locations tend to bounce quickly.’
Dubai Pearl is at the centre of a newly developed part of the city, surrounded by populated areas such as Palm Jumeirah, Dubai Media City and Dubai Internet City where international media and technology companies are based. The densely populated Dubai Marina is also nearby.
The project has the ‘best location with a captive clientele in a six-mile radius,’ Mr Joseph said. ‘Our area lacks communities where residents can walk from end to end.’
The company is selling residential space at 2,250 dirhams (S$854) a square foot, while furnished and serviced Baccarat-branded apartments are selling starting at US$1,000 a square foot. The prices have been slashed by about 30 per cent, he said.
Source: Business Times, 18 Mar 2010
Tuesday, February 23, 2010
US$500m Gulf property fund launched
Al Rajhi Capital, the investment arm of Saudi Arabia’s Al Rajhi Bank and Bahrain’s Arcapita Bank has launched a US$500 million Gulf property income fund to capitalise on falling prices, the firms said yesterday.
The two companies will seed a joint investment of US$50 million for the fund, which will focus on logistics warehouses, healthcare and education-related assets in Saudi Arabia and the Gulf Arab region, they said in a statement. Saudi Arabia has earmarked around US$400 billion to boost infrastructure over the next five years and is looking to cater for growing demand for new housing from the young population in the world’s largest oil exporter. al Rajhi and Arcapita have completed the first acquisition for the fund and bought a logistics and distribution centre in the kingdom’s capital, Riyadh, for US$79.7 million.
‘We believe that this fund is launching at a time that will allow us to deploy our financial resources to gather a portfolio of prime real estate assets at attractive valuations,’ Jorge Cantonnet, managing director and head of private equity at Al Rajhi Capital said.
The logistics facility is the main distribution hub for Azizia Panda United Company, a leading supermarket firm in the kingdom, and will be leased back to Azizia over 18 years, the statement said.
Dubai-based investment bank Rasmala Investments said in October it was setting up a 500 million riyal (S$187.88 million) Islamic property fund to pursue opportunities in mid-income housing in Saudi Arabia. But in Dubai, which has been worst affected in the region by the economic downturn, the emirate’s second-largest developer, Deyaar, postponed earlier in February a 500 million-dirham (S$191.8 million) distressed property fund after international investors withdrew previously committed funds.
Property prices in Dubai have plunged some 60 per cent since their peaks in 2008 and billions of dollars worth of projects have been put on hold or cancelled.
Source: Business Times, 23 Feb 2010
The two companies will seed a joint investment of US$50 million for the fund, which will focus on logistics warehouses, healthcare and education-related assets in Saudi Arabia and the Gulf Arab region, they said in a statement. Saudi Arabia has earmarked around US$400 billion to boost infrastructure over the next five years and is looking to cater for growing demand for new housing from the young population in the world’s largest oil exporter. al Rajhi and Arcapita have completed the first acquisition for the fund and bought a logistics and distribution centre in the kingdom’s capital, Riyadh, for US$79.7 million.
‘We believe that this fund is launching at a time that will allow us to deploy our financial resources to gather a portfolio of prime real estate assets at attractive valuations,’ Jorge Cantonnet, managing director and head of private equity at Al Rajhi Capital said.
The logistics facility is the main distribution hub for Azizia Panda United Company, a leading supermarket firm in the kingdom, and will be leased back to Azizia over 18 years, the statement said.
Dubai-based investment bank Rasmala Investments said in October it was setting up a 500 million riyal (S$187.88 million) Islamic property fund to pursue opportunities in mid-income housing in Saudi Arabia. But in Dubai, which has been worst affected in the region by the economic downturn, the emirate’s second-largest developer, Deyaar, postponed earlier in February a 500 million-dirham (S$191.8 million) distressed property fund after international investors withdrew previously committed funds.
Property prices in Dubai have plunged some 60 per cent since their peaks in 2008 and billions of dollars worth of projects have been put on hold or cancelled.
Source: Business Times, 23 Feb 2010
Tuesday, January 12, 2010
Dubai’s first foreclosure may open the floodgates
Dubai’s housing rout sent prices down 52 per cent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice.
Until now.
Barclays plc has won the sheikdom’s first foreclosure cases in court, clearing the way for lenders holding about US$16 billion of Dubai home loans to take action when borrowers don’t pay.
Islamic lender Tamweel PJSC, the emirate’s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 per cent of its mortgages are in default.
‘Banks will be more aggressive in pursuing legal action if they see the process is efficient,’ said Antoine Yacoub, a banking analyst at Moody’s Investors Service Inc. ‘They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through.’
The successful foreclosures by Barclays may open the floodgates in Dubai’s property market, which went from the world’s best in 2008 to the worst after credit dried up and speculators who had fuelled price increases left the market, according to Deutsche Bank AG. Moody’s estimated in September that 12 per cent of the 27,000 residential mortgages in the sheikdom would default within 12 to 18 months.
Banks and developers until now have avoided the process of reclaiming homes through the courts, barred by tradition and an arcane legal process that few understood. The Barclays and Tamweel cases may change that because they show that a 2008 mortgage law – setting out rules for default, foreclosure and repossession – is working.
The law requires lenders to give homeowners 30-day notice of their intent to pursue a foreclosure, said Jody Waugh, a partner at law firm Al Tamimi & Co in Dubai. Courts then review the case and can issue a debt judgment that turns the property over to Dubai’s Land Department for auction.
Mr Waugh estimates that the process may take two to four months.
Barclays, Britain’s second-largest bank, said in an e- mailed reply to questions that it won the foreclosure orders, without providing details of the cases. The ruling shows that Dubai’s market is ‘evolving and is poised to come at par with other mature markets of the world’, the bank said.
Both lenders and developers in the United Arab Emirates have tried to stem rising defaults through out-of-court settlements with distressed customers after falling prices left buyers with mortgages worth more than their properties. That has helped minimise the amount of bad debt on their balance sheets and kept repossessed houses off a market that’s already suffering from too much supply.
Provisions for bad loans in the UAE surged 68 per cent to 32 billion dirhams (S$12.1 billion) as of November, compared with a year earlier.
Before the mortgage law was passed, lenders and builders could resort to the courts to enforce contracts, though they didn’t have the right to foreclose.
Tamweel’s pending cases, filed almost two months ago, involve homes abandoned by owners who left Dubai at the onset of the global financial crisis, chief executive officer Wasim Saifi said.
Tamweel’s default rate has been ‘hovering between 2.5 per cent and 4 per cent for the past six months,’ he said.
As alternatives to foreclosures, lenders in Dubai have extended payment periods and developers allowed customers with several properties to return some of them.
The absence of mortgage securitisation here makes it easier for UAE lenders to restructure loans than their counterparts in the US, where mortgage debt was often sold on to investors.
UK-based Standard Chartered plc and HSBC Holdings plc top the list of foreign banks providing mortgages in the UAE, according to Deepak Tolani, senior research associate at Al Mal Capital PSC.
‘While it is not Standard Chartered’s preferred approach, foreclosure is a legitimate course of action should a borrower not meet their obligations,’ the bank said in a statement.
HSBC declined to comment on the issue when contacted by Bloomberg, while Islamic mortgage lender Amlak Finance PJSC didn’t respond to e-mailed questions.
Banks are unlikely to head to the courts to foreclose on properties en masse because of concerns that large numbers of repossessed properties on the market will drive prices lower, said Saud Masud, a Dubai-based real estate analyst at UBS.
While auctioning a few properties ‘will be easy’, hundreds or even thousands of foreclosure sales may draw buyers away from new and secondhand properties, Mr Masud said.
‘It’s a slippery slope,’ he said. ‘Mass auctions may re-price the property market in a meaningful way as investors prefer to pick real bargains in auctions.’
A cultural stigma attached to forcing people out of their homes has also deterred foreclosures. However, that may not protect speculative investors who helped drive prices up by buying several properties with the aim of selling at a profit soon after.
‘The mortgage law has given clarity and certainty to the exact process that must be followed by anyone wishing to enforce a mortgage,’ said Mr Waugh, whose firm is currently handling fewer than 10 repossession cases.
Dubai’s population, which is about 90 per cent expatriate, may drop by 8 per cent in 2009 and another 2 per cent in 2010, UBS AG estimated in March last year. Dubai’s immigration department doesn’t provide regular statistics on visas.
Citizens make up only about 20 per cent of the overall UAE population, which largely consists of workers from countries including Pakistan, the UK and Lebanon. Workers have one month to leave the country after their work visas are cancelled.
Dubai first allowed foreigners to own property in 2002. That led real estate prices to quadruple in the following six years, helped by a growing expatriate workforce and speculation fuelled by borrowing.
The UAE last year scrapped a rule that automatically qualified homeowners in Dubai for a permanent residency visa. Owners of properties valued at one million dirhams or more are now required to renew residency visas every six months.
About 65,000 residential units will be completed in Dubai by 2011 and the emirate needs to create a minimum of 100,000 white-collar jobs to satisfy oncoming supply, Nomura said on Oct 15.
Deutshe Bank estimates that 30,000 units may be delivered by the end of this year.
‘When people talk about litigation in the Middle East, they’re concerned over the possible time it would take to obtain a judgment,’ Mr Waugh said. ‘The speed at which it appears judgments may be obtained under the mortgage law is a real, positive sign for banks.’ The Barclays cases were filed in November, he said.
The UAE’s central bank in October proposed reducing the time it takes for a loan to be classified as non-performing by half to 90 days. Banks ‘most probably’ will be asked to comply during the first quarter of this year, said Sofia El Boury, a banking analyst at Shuaa Capital PSC.
So far, no properties have been auctioned, according to Mohammed Sultan Thani, assistant director general at the Dubai Land Department. Requests may start pouring in this year as banks give up on other alternatives, he said.
‘Amicable solutions are hard to reach when a buyer has lost his job’ or when a property is worth less than the amount owed on it, Mr Thani said.
Mortgage loans totalled 137.6 billion dirhams in July last year, central bank data shows. About 25,000 to 30,000 mortgages have been taken in the UAE with over 95 per cent of them in Dubai, analysts say.
The central bank estimates that real estate accounts for about 13 per cent of total loans in the UAE. Shuaa Capital’s Ms El Boury said the real figure is ‘much higher’ and official numbers aren’t realistic ‘given the financing contributions to real estate construction and development in the UAE.’
The new mortgage law applies to only some kinds of Islamic lending, Mr Waugh said.
Shuaa estimates about 25,000 mortgages were extended by Tamweel and its competitor Amlak alone. The two lenders, which control more than half of the UAE’s mortgage market, are set to merge this year. Shares of both companies have been suspended since November 2008.
The biggest risks to banks come from loans underwritten after 2007, which are ‘most probably in deep negative equity by now’, Moody’s Mr Yacoub said.
Also at risk are Islamic Istisna’ mortgages where a buyer doesn’t make any payments until the property is delivered, he said.
Barclays said the court’s decisions will renew lenders’ faith in Dubai’s legal system, ‘which could result in bigger lending mandates specifically for mortgage business’.
Judging by the first cases, the process seems to be working, Al Tamimi’s Mr Waugh said. ‘Like anything, there are a few teething problems that are being resolved, but the fact that we have obtained judgments so quickly is positive.’
Source: Business Times, 12 Jan 2010
Until now.
Barclays plc has won the sheikdom’s first foreclosure cases in court, clearing the way for lenders holding about US$16 billion of Dubai home loans to take action when borrowers don’t pay.
Islamic lender Tamweel PJSC, the emirate’s biggest mortgage bank, has several of its own foreclosure claims pending and estimates about 3 per cent of its mortgages are in default.
‘Banks will be more aggressive in pursuing legal action if they see the process is efficient,’ said Antoine Yacoub, a banking analyst at Moody’s Investors Service Inc. ‘They were trying to avoid the courts and restructure most of their loans, but once they see a precedent has been set, they will be encouraged to push more cases through.’
The successful foreclosures by Barclays may open the floodgates in Dubai’s property market, which went from the world’s best in 2008 to the worst after credit dried up and speculators who had fuelled price increases left the market, according to Deutsche Bank AG. Moody’s estimated in September that 12 per cent of the 27,000 residential mortgages in the sheikdom would default within 12 to 18 months.
Banks and developers until now have avoided the process of reclaiming homes through the courts, barred by tradition and an arcane legal process that few understood. The Barclays and Tamweel cases may change that because they show that a 2008 mortgage law – setting out rules for default, foreclosure and repossession – is working.
The law requires lenders to give homeowners 30-day notice of their intent to pursue a foreclosure, said Jody Waugh, a partner at law firm Al Tamimi & Co in Dubai. Courts then review the case and can issue a debt judgment that turns the property over to Dubai’s Land Department for auction.
Mr Waugh estimates that the process may take two to four months.
Barclays, Britain’s second-largest bank, said in an e- mailed reply to questions that it won the foreclosure orders, without providing details of the cases. The ruling shows that Dubai’s market is ‘evolving and is poised to come at par with other mature markets of the world’, the bank said.
Both lenders and developers in the United Arab Emirates have tried to stem rising defaults through out-of-court settlements with distressed customers after falling prices left buyers with mortgages worth more than their properties. That has helped minimise the amount of bad debt on their balance sheets and kept repossessed houses off a market that’s already suffering from too much supply.
Provisions for bad loans in the UAE surged 68 per cent to 32 billion dirhams (S$12.1 billion) as of November, compared with a year earlier.
Before the mortgage law was passed, lenders and builders could resort to the courts to enforce contracts, though they didn’t have the right to foreclose.
Tamweel’s pending cases, filed almost two months ago, involve homes abandoned by owners who left Dubai at the onset of the global financial crisis, chief executive officer Wasim Saifi said.
Tamweel’s default rate has been ‘hovering between 2.5 per cent and 4 per cent for the past six months,’ he said.
As alternatives to foreclosures, lenders in Dubai have extended payment periods and developers allowed customers with several properties to return some of them.
The absence of mortgage securitisation here makes it easier for UAE lenders to restructure loans than their counterparts in the US, where mortgage debt was often sold on to investors.
UK-based Standard Chartered plc and HSBC Holdings plc top the list of foreign banks providing mortgages in the UAE, according to Deepak Tolani, senior research associate at Al Mal Capital PSC.
‘While it is not Standard Chartered’s preferred approach, foreclosure is a legitimate course of action should a borrower not meet their obligations,’ the bank said in a statement.
HSBC declined to comment on the issue when contacted by Bloomberg, while Islamic mortgage lender Amlak Finance PJSC didn’t respond to e-mailed questions.
Banks are unlikely to head to the courts to foreclose on properties en masse because of concerns that large numbers of repossessed properties on the market will drive prices lower, said Saud Masud, a Dubai-based real estate analyst at UBS.
While auctioning a few properties ‘will be easy’, hundreds or even thousands of foreclosure sales may draw buyers away from new and secondhand properties, Mr Masud said.
‘It’s a slippery slope,’ he said. ‘Mass auctions may re-price the property market in a meaningful way as investors prefer to pick real bargains in auctions.’
A cultural stigma attached to forcing people out of their homes has also deterred foreclosures. However, that may not protect speculative investors who helped drive prices up by buying several properties with the aim of selling at a profit soon after.
‘The mortgage law has given clarity and certainty to the exact process that must be followed by anyone wishing to enforce a mortgage,’ said Mr Waugh, whose firm is currently handling fewer than 10 repossession cases.
Dubai’s population, which is about 90 per cent expatriate, may drop by 8 per cent in 2009 and another 2 per cent in 2010, UBS AG estimated in March last year. Dubai’s immigration department doesn’t provide regular statistics on visas.
Citizens make up only about 20 per cent of the overall UAE population, which largely consists of workers from countries including Pakistan, the UK and Lebanon. Workers have one month to leave the country after their work visas are cancelled.
Dubai first allowed foreigners to own property in 2002. That led real estate prices to quadruple in the following six years, helped by a growing expatriate workforce and speculation fuelled by borrowing.
The UAE last year scrapped a rule that automatically qualified homeowners in Dubai for a permanent residency visa. Owners of properties valued at one million dirhams or more are now required to renew residency visas every six months.
About 65,000 residential units will be completed in Dubai by 2011 and the emirate needs to create a minimum of 100,000 white-collar jobs to satisfy oncoming supply, Nomura said on Oct 15.
Deutshe Bank estimates that 30,000 units may be delivered by the end of this year.
‘When people talk about litigation in the Middle East, they’re concerned over the possible time it would take to obtain a judgment,’ Mr Waugh said. ‘The speed at which it appears judgments may be obtained under the mortgage law is a real, positive sign for banks.’ The Barclays cases were filed in November, he said.
The UAE’s central bank in October proposed reducing the time it takes for a loan to be classified as non-performing by half to 90 days. Banks ‘most probably’ will be asked to comply during the first quarter of this year, said Sofia El Boury, a banking analyst at Shuaa Capital PSC.
So far, no properties have been auctioned, according to Mohammed Sultan Thani, assistant director general at the Dubai Land Department. Requests may start pouring in this year as banks give up on other alternatives, he said.
‘Amicable solutions are hard to reach when a buyer has lost his job’ or when a property is worth less than the amount owed on it, Mr Thani said.
Mortgage loans totalled 137.6 billion dirhams in July last year, central bank data shows. About 25,000 to 30,000 mortgages have been taken in the UAE with over 95 per cent of them in Dubai, analysts say.
The central bank estimates that real estate accounts for about 13 per cent of total loans in the UAE. Shuaa Capital’s Ms El Boury said the real figure is ‘much higher’ and official numbers aren’t realistic ‘given the financing contributions to real estate construction and development in the UAE.’
The new mortgage law applies to only some kinds of Islamic lending, Mr Waugh said.
Shuaa estimates about 25,000 mortgages were extended by Tamweel and its competitor Amlak alone. The two lenders, which control more than half of the UAE’s mortgage market, are set to merge this year. Shares of both companies have been suspended since November 2008.
The biggest risks to banks come from loans underwritten after 2007, which are ‘most probably in deep negative equity by now’, Moody’s Mr Yacoub said.
Also at risk are Islamic Istisna’ mortgages where a buyer doesn’t make any payments until the property is delivered, he said.
Barclays said the court’s decisions will renew lenders’ faith in Dubai’s legal system, ‘which could result in bigger lending mandates specifically for mortgage business’.
Judging by the first cases, the process seems to be working, Al Tamimi’s Mr Waugh said. ‘Like anything, there are a few teething problems that are being resolved, but the fact that we have obtained judgments so quickly is positive.’
Source: Business Times, 12 Jan 2010
Tuesday, January 5, 2010
Emaar looks for growth beyond Dubai, property
It is not considering a merger with rival Nakheel, which has about US$20b of debt
Dubai’s Emaar Properties will focus its efforts abroad and on non-property sectors such as hospitality and hospitals, the company said yesterday, as a real estate crunch hits its home market.
On the day it was due to open the world’s tallest building, Burj Dubai, Emaar said it was not considering a merger with unlisted rival developer Nakheel, which is at the centre of a US$26 billion debt storm involving its government-held parent company Dubai World.
Emaar said the US$1.5 billion tower would provide a 10 per cent yield for the firm and that the opening would boost earnings for most of 2010. But investors took little heart from the outlook and sold Emaar shares down 2.2 per cent, pulling Dubai’s broader index down 2.1 per cent.
Emaar cancelled a merger in December with the property units of Dubai Holding in a dramatic strategic reversal following the financial implosion of companies tied to government-owned Dubai World, one of the emirate’s largest conglomerates. Dubai Holding is owned by the ruler of the Gulf emirate.
‘All the studies which we made, we couldn’t find a way ahead and it wasn’t the right time for a merger at this time,’ said Issam Galadari, chief executive of Emaar Dubai, at a media briefing.
Chairman Mohamed Alabbar told reporters there were no plans to merge with Nakheel, the largest property company in the Middle East, which is struggling under a collapse in earnings and a debt pile worth around US$20 billion.
The Emaar executives put a brave face on the launch of Burj Dubai, saying it was a positive move forward as the emirate’s property prices stabilised, despite wider expectations for continued stress in Dubai’s real estate sector.
‘You have to ask why we are building all this? To bring quality of life and a smile to people and I think we should continue to do that,’ Mr Alabbar told journalists. ‘Dubai is where our life is. We have beautiful long-term plans for development in Dubai,’ he said.
Emaar is the Arab world’s largest listed developer.
The needle-shaped concrete, steel and glass Burj Dubai, described by its developer as a ‘vertical city’ as it dwarfs existing skyscrapers, boasts new limits in design and construction.
Emaar has maintained the suspense over the final height of the skyscraper, saying only that it exceeds 800 metres. But it revealed yesterday that the tower will have over 200 floors, only 160 of which will be inhabited, while the remaining floors will be for services. The tower’s opening has been delayed twice and, unlike other projects, survived cancellations after the crisis hit the once-booming city.
‘We build for years to come. Crises come and go,’ said Mr Alabbar. ‘The world has gone through two years of difficult times. We must have hope and optimism.’
When Dubai’s ruler Sheikh Mohammed bin Rashed al-Maktoum opens the world’s tallest tower, it won’t be the world’s fullest.
The occupancy rate at Burj Dubai may reach 75 per cent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at Shuaa Capital PSC. ‘Those who bought with the intention of leasing will face a difficult time, because few companies today can justify paying premiums for luxury,’ Mr Cherry said.
In the five years it has taken to build the tower, the sheikhdom’s debt-fuelled property market has gone from the world’s best performing to the worst, forcing officials to renegotiate loans and seek bailouts from neighbouring Abu Dhabi.
Apartment prices in the tower, which soared as high as 10,000 dirhams (S$3,809) per sq ft at the 2008 peak, have dropped to less than half of that.
‘It may still run at a premium to the rest of the market, but I’d be surprised if there were no defaults and if vacancy rates didn’t creep up’ since a large proportion of the developer’s sales were financed through mortgages, said Saud Masud, a Dubai-based analyst at UBS. ‘This is a symbol of the economic momentum that Dubai had and an ironic reminder of its property bubble.’
Source: Business Times, 5 Jan 2010
Dubai’s Emaar Properties will focus its efforts abroad and on non-property sectors such as hospitality and hospitals, the company said yesterday, as a real estate crunch hits its home market.
On the day it was due to open the world’s tallest building, Burj Dubai, Emaar said it was not considering a merger with unlisted rival developer Nakheel, which is at the centre of a US$26 billion debt storm involving its government-held parent company Dubai World.
Emaar said the US$1.5 billion tower would provide a 10 per cent yield for the firm and that the opening would boost earnings for most of 2010. But investors took little heart from the outlook and sold Emaar shares down 2.2 per cent, pulling Dubai’s broader index down 2.1 per cent.
Emaar cancelled a merger in December with the property units of Dubai Holding in a dramatic strategic reversal following the financial implosion of companies tied to government-owned Dubai World, one of the emirate’s largest conglomerates. Dubai Holding is owned by the ruler of the Gulf emirate.
‘All the studies which we made, we couldn’t find a way ahead and it wasn’t the right time for a merger at this time,’ said Issam Galadari, chief executive of Emaar Dubai, at a media briefing.
Chairman Mohamed Alabbar told reporters there were no plans to merge with Nakheel, the largest property company in the Middle East, which is struggling under a collapse in earnings and a debt pile worth around US$20 billion.
The Emaar executives put a brave face on the launch of Burj Dubai, saying it was a positive move forward as the emirate’s property prices stabilised, despite wider expectations for continued stress in Dubai’s real estate sector.
‘You have to ask why we are building all this? To bring quality of life and a smile to people and I think we should continue to do that,’ Mr Alabbar told journalists. ‘Dubai is where our life is. We have beautiful long-term plans for development in Dubai,’ he said.
Emaar is the Arab world’s largest listed developer.
The needle-shaped concrete, steel and glass Burj Dubai, described by its developer as a ‘vertical city’ as it dwarfs existing skyscrapers, boasts new limits in design and construction.
Emaar has maintained the suspense over the final height of the skyscraper, saying only that it exceeds 800 metres. But it revealed yesterday that the tower will have over 200 floors, only 160 of which will be inhabited, while the remaining floors will be for services. The tower’s opening has been delayed twice and, unlike other projects, survived cancellations after the crisis hit the once-booming city.
‘We build for years to come. Crises come and go,’ said Mr Alabbar. ‘The world has gone through two years of difficult times. We must have hope and optimism.’
When Dubai’s ruler Sheikh Mohammed bin Rashed al-Maktoum opens the world’s tallest tower, it won’t be the world’s fullest.
The occupancy rate at Burj Dubai may reach 75 per cent this year, with office leasing proving the biggest challenge for investors, said Roy Cherry, an analyst at Shuaa Capital PSC. ‘Those who bought with the intention of leasing will face a difficult time, because few companies today can justify paying premiums for luxury,’ Mr Cherry said.
In the five years it has taken to build the tower, the sheikhdom’s debt-fuelled property market has gone from the world’s best performing to the worst, forcing officials to renegotiate loans and seek bailouts from neighbouring Abu Dhabi.
Apartment prices in the tower, which soared as high as 10,000 dirhams (S$3,809) per sq ft at the 2008 peak, have dropped to less than half of that.
‘It may still run at a premium to the rest of the market, but I’d be surprised if there were no defaults and if vacancy rates didn’t creep up’ since a large proportion of the developer’s sales were financed through mortgages, said Saud Masud, a Dubai-based analyst at UBS. ‘This is a symbol of the economic momentum that Dubai had and an ironic reminder of its property bubble.’
Source: Business Times, 5 Jan 2010
Tuesday, December 8, 2009
Dubai waterfront land may be seized
Nakheel PJSC creditors may win the right to seize a strip of barren waterfront land the size of Manhattan if the company defaults on the US$3.5 billion bond backing the development.
Investors will be able to seek foreclosure on the property’s mortgages should the Dubai World unit fail to repay the loan, according to the bond’s prospectus.
The debt is due next Monday, after which Nakheel has two weeks to remedy a default. The property forms part of the Dubai Waterfront project, where Nakheel plans to build a city twice the size of Hong Kong.
Dubai World is trying to restructure US$26 billion of debt after seeking a ’standstill’ agreement on liabilities, including Nakheel’s sukuk bond on the waterfront parcel.
The bond is secured against a 50-year lease on 63 million square metres of land on which Nakheel plans to build the southern part of Dubai Waterfront, and a series of manmade islands in the shape of a crescent.
‘The project isn’t likely to happen,’ said Saud Masud, a Dubai-based property analyst at UBS AG. ‘I’d be very surprised if anything is built in the next five years.’
The land was valued at US$4.2 billion by Jones Lang LaSalle Inc three years ago, based on the entire project being ready by 2018, when it would be worth US$11.8 billion, the prospectus said.
Sukuk are securities that comply with Islamic law, which forbids interest-bearing bonds. The leases on the two Nakheel properties were sold to a special-purpose vehicle that issued the sukuk. They were then leased back to Nakheel, which made rental payments to stay within the law.
The sukuk’s trustee, acting on behalf of noteholders, can ‘take any action to enforce any of the security documents’, if Nakheel doesn’t redeem the bond, said the 2006 prospectus, which classifies the mortgages as security documents.
‘The outcome of Nakheel will set the tone of how people will approach the question of access to assets, what a security package is really worth, and legal rights with a jurisdiction,’ said Brinda Kirpalani, head of credit and convertible research at ADI Alternative Investments SA in Paris.
The waterfront project was among Dubai World’s most ambitious. Dubai Waterfront posters had lined a wall of billboards about 10 metres high and stretched for at least a kilometre along Sheikh Zayed Road, which surrounds part of the land. The posters were removed in the last month. Smaller billboards with Nakheel’s corporate logo remain.
Now the area is bare, except for a cluster of partly finished low-rise buildings and idle cranes for hundreds of metres. Yesterday, camels roamed part of the land.
Source: Business Times, 8 Dec 2009
Investors will be able to seek foreclosure on the property’s mortgages should the Dubai World unit fail to repay the loan, according to the bond’s prospectus.
The debt is due next Monday, after which Nakheel has two weeks to remedy a default. The property forms part of the Dubai Waterfront project, where Nakheel plans to build a city twice the size of Hong Kong.
Dubai World is trying to restructure US$26 billion of debt after seeking a ’standstill’ agreement on liabilities, including Nakheel’s sukuk bond on the waterfront parcel.
The bond is secured against a 50-year lease on 63 million square metres of land on which Nakheel plans to build the southern part of Dubai Waterfront, and a series of manmade islands in the shape of a crescent.
‘The project isn’t likely to happen,’ said Saud Masud, a Dubai-based property analyst at UBS AG. ‘I’d be very surprised if anything is built in the next five years.’
The land was valued at US$4.2 billion by Jones Lang LaSalle Inc three years ago, based on the entire project being ready by 2018, when it would be worth US$11.8 billion, the prospectus said.
Sukuk are securities that comply with Islamic law, which forbids interest-bearing bonds. The leases on the two Nakheel properties were sold to a special-purpose vehicle that issued the sukuk. They were then leased back to Nakheel, which made rental payments to stay within the law.
The sukuk’s trustee, acting on behalf of noteholders, can ‘take any action to enforce any of the security documents’, if Nakheel doesn’t redeem the bond, said the 2006 prospectus, which classifies the mortgages as security documents.
‘The outcome of Nakheel will set the tone of how people will approach the question of access to assets, what a security package is really worth, and legal rights with a jurisdiction,’ said Brinda Kirpalani, head of credit and convertible research at ADI Alternative Investments SA in Paris.
The waterfront project was among Dubai World’s most ambitious. Dubai Waterfront posters had lined a wall of billboards about 10 metres high and stretched for at least a kilometre along Sheikh Zayed Road, which surrounds part of the land. The posters were removed in the last month. Smaller billboards with Nakheel’s corporate logo remain.
Now the area is bare, except for a cluster of partly finished low-rise buildings and idle cranes for hundreds of metres. Yesterday, camels roamed part of the land.
Source: Business Times, 8 Dec 2009
Dubai won’t sell assets to aid Dubai World
Comment sends Dubai stock market down almost 6% to 20-week low
Dubai moved on yesterday to ring-fence prized assets from the US$26 billion debt restructuring of Dubai World, denting already fragile investor sentiment ahead of talks between the struggling conglomerate and key creditors.
Bahrain’s central bank governor said that the kingdom’s exposure to Dubai World was limited, echoing top monetary officials in Saudi Arabia and Oman, while the biggest lenders in Qatar and Deutsche Bank both said that they had no exposure.
Dubai World is expected to meet its main bank creditors this week, possibly as early as yesterday, to discuss a request to delay debt payments that has shaken global markets and damaged the reputation of the Gulf’s business hub, bankers said.
London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland will attend, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank, an unnamed Abu Dhabi bank executive said last week.
Dubai’s finance chief said yesterday that state-controlled Dubai World might sell some assets to finance its commitments, but that the emirate’s government would not chip in with any disposals of its own.
‘Part of obtaining finance is selling assets . . . belonging to the company and not the government,’ Abdulrahman Al-Saleh, director-general of Dubai’s department of finance, said in an interview with Al Jazeera television.
‘There is confusion in the media that the government plans to sell assets . . . The company has foreign investments and real estate investments abroad. There is nothing to prevent selling these assets.’
The struggling conglomerate on Nov 30 shed some light on how it planned to restructure the US$26 billion debt pile, including through asset sales.
It said that the restructuring excluded firms on a ’stable financial footing’ such as Istithmar World, DP World and Jebel Ali Freezone, implying its global crown jewels would not be up for grabs.
Istithmar’s portfolio ranges from US high-end retailer Barneys to the luxury W Hotel in Washington, D.C. as well as sought-after property in London including 10 Whitehall Place.
Infinity World, another unit exempt from the plans, is a stakeholder in MGM Mirage.
‘They need to do this in order to support their statements about the separation between Dubai World and Dubai government . . . The question now is which assets and at what price,’ said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.
Mr Saleh’s comments sent the Dubai stock market tumbling almost 6 per cent to a 20-week low, reversing quick gains made on Sunday, with DP World, the flagship unit of Dubai World, slumping 5.5 per cent, while property stocks were all trading down.
‘(The market) did not react well to the Dubai government news, which again cast a cloud of doubt,’ said Ayman El-Saheb, Darahem Financial Brokerage’s director of operations.
Since Dubai World requested a payment standstill on Nov 25 for US$3.52 billion worth of Islamic bonds maturing this month, regional government officials and bankers have looked to downplay the impact of the measure on their economies.
Bahrain’s central bank governor joined the chorus yesterday, saying that the kingdom’s exposure to Dubai World was less than 0.1 per cent of total assets or US$281 million.
Deutsche Bank’s Middle East’s chief executive Henry Azzam said that the bank did not have any exposure, and that he did not expect the crisis to have a major impact on the region’s banking sector.
Source: Business Times, 8 Dec 2009
Dubai moved on yesterday to ring-fence prized assets from the US$26 billion debt restructuring of Dubai World, denting already fragile investor sentiment ahead of talks between the struggling conglomerate and key creditors.
Bahrain’s central bank governor said that the kingdom’s exposure to Dubai World was limited, echoing top monetary officials in Saudi Arabia and Oman, while the biggest lenders in Qatar and Deutsche Bank both said that they had no exposure.
Dubai World is expected to meet its main bank creditors this week, possibly as early as yesterday, to discuss a request to delay debt payments that has shaken global markets and damaged the reputation of the Gulf’s business hub, bankers said.
London-listed Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland will attend, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank, an unnamed Abu Dhabi bank executive said last week.
Dubai’s finance chief said yesterday that state-controlled Dubai World might sell some assets to finance its commitments, but that the emirate’s government would not chip in with any disposals of its own.
‘Part of obtaining finance is selling assets . . . belonging to the company and not the government,’ Abdulrahman Al-Saleh, director-general of Dubai’s department of finance, said in an interview with Al Jazeera television.
‘There is confusion in the media that the government plans to sell assets . . . The company has foreign investments and real estate investments abroad. There is nothing to prevent selling these assets.’
The struggling conglomerate on Nov 30 shed some light on how it planned to restructure the US$26 billion debt pile, including through asset sales.
It said that the restructuring excluded firms on a ’stable financial footing’ such as Istithmar World, DP World and Jebel Ali Freezone, implying its global crown jewels would not be up for grabs.
Istithmar’s portfolio ranges from US high-end retailer Barneys to the luxury W Hotel in Washington, D.C. as well as sought-after property in London including 10 Whitehall Place.
Infinity World, another unit exempt from the plans, is a stakeholder in MGM Mirage.
‘They need to do this in order to support their statements about the separation between Dubai World and Dubai government . . . The question now is which assets and at what price,’ said John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group in Riyadh.
Mr Saleh’s comments sent the Dubai stock market tumbling almost 6 per cent to a 20-week low, reversing quick gains made on Sunday, with DP World, the flagship unit of Dubai World, slumping 5.5 per cent, while property stocks were all trading down.
‘(The market) did not react well to the Dubai government news, which again cast a cloud of doubt,’ said Ayman El-Saheb, Darahem Financial Brokerage’s director of operations.
Since Dubai World requested a payment standstill on Nov 25 for US$3.52 billion worth of Islamic bonds maturing this month, regional government officials and bankers have looked to downplay the impact of the measure on their economies.
Bahrain’s central bank governor joined the chorus yesterday, saying that the kingdom’s exposure to Dubai World was less than 0.1 per cent of total assets or US$281 million.
Deutsche Bank’s Middle East’s chief executive Henry Azzam said that the bank did not have any exposure, and that he did not expect the crisis to have a major impact on the region’s banking sector.
Source: Business Times, 8 Dec 2009
Saturday, December 5, 2009
World’s tallest tower marks end of era
The Burj Dubai tower opens on Jan 4 even as hundreds of other building projects in the emirate are mothballed
NEXT month’s opening of the Burj Dubai tower, the world’s tallest building, will bring Dubai’s era of exuberant expansion to a shuddering halt as hundreds of other building projects are already mothballed.
Plunging property prices and weak demand had already put a dampener on new schemes even before last week’s shock announcement by state-owned giant Dubai World that it wants to halt debt payments for six months.
‘It’s not exactly going to improve investor confidence,’ said Matthew Green, associate director at property agency CB Richard Ellis (CBRE), which has reported a 55 per cent year-on-year drop in downtown Dubai commercial rental rates and a 67 per cent fall outside the centre.
The 800m tall skyscraper is the centrepiece of a US$20 billion new shopping district, Downtown Burj Dubai, which also includes 30,000 apartments and the Dubai Mall, which claims that its space for 1,200 shops makes it the world’s biggest indoor shopping centre.
The tower, whose needle-shaped upper section is visible from 15 km away, stands on one side of a popular piazza, thronged with strollers in the evenings, when a fountain gushes in the central lake.
Developer Emaar has officially announced that Burj Dubai tower will open on Jan 4, the fourth anniversary of Mohammed bin Rashed al-Maktoum’s accession to power in Dubai.
Under construction since 2004, the opening of the steel-and-glass landmark has unofficially been put back from late 2008, but no further delay is likely for fear of loss of face by Emaar, which has not escaped the impact of the global property downturn.
It is keeping quiet about how many tenants it has found for the 160-storey building, and the company’s plan announced in June to merge with state-owned Dubai Holding gave the impression that stockmarket-listed Emaar was not in the healthiest financial condition.
That impression was reinforced on Thursday by ratings agency Standard and Poor’s Corp, which included both Emaar and Dubai Holding among six state-linked companies that it downgraded to junk bond status.
Despite the debt crisis that unfolded last week, Dubai remains a bustling city full of eye-catching sights.
The city state’s iconic national symbol is the three km long Palm Jumeirah artificial island, full of luxury villas whose owners are said to include David Beckham and Brad Pitt.
Immigrant workers were still busy yesterday beavering away on a dozen new housing projects on the island, but Palm Jumeirah’s developer Nakheel had halted plans for two more islands even before its credit woes were broadcast around the world last week.
Nakheel’s US$3.5 billion Islamic bond programme, due for repayment on Dec 14, is the main deal immediately affected by parent company Dubai World’s debt standstill.
All over Dubai, work was still in progress yesterday on dozens of more modest projects, although most are buildings near completion, with the scaffolding only remaining around the upper storeys.
Grand schemes such as the Burj Dubai and Palm Jumeirah are a thing of the past.
The World, an enormous project for artificial islands shaped like the continents, is now no more than a group of sandbanks, and no-one expects Nakheel to go ahead with a one km tall tower announced a year ago.
Market research company Proleads has estimated that projects worth US$582 billion or 45 per cent of the value of all developments, have been put on hold in Dubai or the other members of the United Arab Emirates.
The turning point in Dubai’s seemingly relentless ballooning growth came exactly a year ago, on Dec 4, 2008, when state-owned Meeras suspended plans that it had announced only two months previously for a US$95 billion city within a city called Jumeirah Gardens.
Now the question under discussion is not whether Dubai will go on growing but whether Sheikh Mohammed can stop the city going into sharp decline.
‘Lease rates are below those of 1996, a reflection of the true extent of the downturn,’ CBRE said in its third-quarter report on the commercial leasing market, written before Dubai World suspended its debt payments.
Rents for homes are down by as much as 48 per cent, and CBRE noted: ‘Newer areas are faring comparatively badly in the downturn when compared to more established communities.’
CBRE’s Mr Green said that his company is not seeing many newcomers to Dubai looking for apartments, as ‘there is not a lot of hiring going on’.
‘We have witnessed a rise in movements either to larger apartments which were previously too expensive, or to the lower end of the market where terms are more flexible and rates lower, due to continued fear of job security,’ he said.
But those are people who already live within the Emirates transferring to a different neighbourhood, Mr Green said.
Even if there was continuing demand for new homes and offices, Dubai’s debt crisis means that investors would be likely to think three times about putting up the money, especially to any state-linked company.
‘Although the authorities are at pains to say this is corporate default and not sovereign, it undoes all the implied security of ever wanting to do business with any state entity in Dubai this side of 2020,’ said Manny Cranus, an analyst with London’s MF Global.
‘Trust is a very expensive commodity and can be very quickly squandered,’ he said.
Source: Business Times, 5 Dec 2009
NEXT month’s opening of the Burj Dubai tower, the world’s tallest building, will bring Dubai’s era of exuberant expansion to a shuddering halt as hundreds of other building projects are already mothballed.
Plunging property prices and weak demand had already put a dampener on new schemes even before last week’s shock announcement by state-owned giant Dubai World that it wants to halt debt payments for six months.
‘It’s not exactly going to improve investor confidence,’ said Matthew Green, associate director at property agency CB Richard Ellis (CBRE), which has reported a 55 per cent year-on-year drop in downtown Dubai commercial rental rates and a 67 per cent fall outside the centre.
The 800m tall skyscraper is the centrepiece of a US$20 billion new shopping district, Downtown Burj Dubai, which also includes 30,000 apartments and the Dubai Mall, which claims that its space for 1,200 shops makes it the world’s biggest indoor shopping centre.
The tower, whose needle-shaped upper section is visible from 15 km away, stands on one side of a popular piazza, thronged with strollers in the evenings, when a fountain gushes in the central lake.
Developer Emaar has officially announced that Burj Dubai tower will open on Jan 4, the fourth anniversary of Mohammed bin Rashed al-Maktoum’s accession to power in Dubai.
Under construction since 2004, the opening of the steel-and-glass landmark has unofficially been put back from late 2008, but no further delay is likely for fear of loss of face by Emaar, which has not escaped the impact of the global property downturn.
It is keeping quiet about how many tenants it has found for the 160-storey building, and the company’s plan announced in June to merge with state-owned Dubai Holding gave the impression that stockmarket-listed Emaar was not in the healthiest financial condition.
That impression was reinforced on Thursday by ratings agency Standard and Poor’s Corp, which included both Emaar and Dubai Holding among six state-linked companies that it downgraded to junk bond status.
Despite the debt crisis that unfolded last week, Dubai remains a bustling city full of eye-catching sights.
The city state’s iconic national symbol is the three km long Palm Jumeirah artificial island, full of luxury villas whose owners are said to include David Beckham and Brad Pitt.
Immigrant workers were still busy yesterday beavering away on a dozen new housing projects on the island, but Palm Jumeirah’s developer Nakheel had halted plans for two more islands even before its credit woes were broadcast around the world last week.
Nakheel’s US$3.5 billion Islamic bond programme, due for repayment on Dec 14, is the main deal immediately affected by parent company Dubai World’s debt standstill.
All over Dubai, work was still in progress yesterday on dozens of more modest projects, although most are buildings near completion, with the scaffolding only remaining around the upper storeys.
Grand schemes such as the Burj Dubai and Palm Jumeirah are a thing of the past.
The World, an enormous project for artificial islands shaped like the continents, is now no more than a group of sandbanks, and no-one expects Nakheel to go ahead with a one km tall tower announced a year ago.
Market research company Proleads has estimated that projects worth US$582 billion or 45 per cent of the value of all developments, have been put on hold in Dubai or the other members of the United Arab Emirates.
The turning point in Dubai’s seemingly relentless ballooning growth came exactly a year ago, on Dec 4, 2008, when state-owned Meeras suspended plans that it had announced only two months previously for a US$95 billion city within a city called Jumeirah Gardens.
Now the question under discussion is not whether Dubai will go on growing but whether Sheikh Mohammed can stop the city going into sharp decline.
‘Lease rates are below those of 1996, a reflection of the true extent of the downturn,’ CBRE said in its third-quarter report on the commercial leasing market, written before Dubai World suspended its debt payments.
Rents for homes are down by as much as 48 per cent, and CBRE noted: ‘Newer areas are faring comparatively badly in the downturn when compared to more established communities.’
CBRE’s Mr Green said that his company is not seeing many newcomers to Dubai looking for apartments, as ‘there is not a lot of hiring going on’.
‘We have witnessed a rise in movements either to larger apartments which were previously too expensive, or to the lower end of the market where terms are more flexible and rates lower, due to continued fear of job security,’ he said.
But those are people who already live within the Emirates transferring to a different neighbourhood, Mr Green said.
Even if there was continuing demand for new homes and offices, Dubai’s debt crisis means that investors would be likely to think three times about putting up the money, especially to any state-linked company.
‘Although the authorities are at pains to say this is corporate default and not sovereign, it undoes all the implied security of ever wanting to do business with any state entity in Dubai this side of 2020,’ said Manny Cranus, an analyst with London’s MF Global.
‘Trust is a very expensive commodity and can be very quickly squandered,’ he said.
Source: Business Times, 5 Dec 2009
Friday, December 4, 2009
S’pore and Dubai – alike, yet so different
Dubai lacked a development plan backed by fundamentals and prudence
IT IS really a contrasting tale of two cities.
Singapore, which is fundamentally strong, is now bracing itself for an economic recovery next year, while debt-ridden Dubai finds itself under the spotlight due to its credit woes.
But as recently as four years ago, Dubai was portraying itself as the ‘Singapore’ of the Middle East, not least because of the fact that the tiny Gulf state’s economic model closely mirrors that of the South-east Asian country in the last decade.
For example, both resource- scarce city states poured vast amounts of resources into aviation, transport, financial services and healthcare – sectors that will presumably boost the country’s development and attract plenty of foreign direct investment (FDI).
In Dubai’s case, its airport was pitched as a strategic stopover point between Asia and Europe, much like Changi Airport, while flag carrier Emirates sought to rival Singapore Airlines (SIA) by adding to its fleet of carriers, even in the face of the economic downturn.
Then there is the Dubai Aerospace Enterprise set up in 2006 to capture some airport development and operations projects in emerging markets, while Dubai Ports beat PSA International to buy P&O Ports for £3.9 billion (S$8.95 billion) in 2007.
Dubai, the world’s sixth-largest container port handler, wanted to run more terminals in China and India to tap growing economies and challenge rivals such as Singapore’s PSA International.
The Gulf state also challenged Singapore in the US$25 billion market for marine oil by setting up an exchange in 2005 to allow futures trading in marine oil at the port of Fujairah, one of the world’s top three fuel stops for ships.
The dizzying pace of development certainly represents a deliberate part of the ruling family’s strategy to transform the Gulf state into a world-class hub.
Construction spree
But beyond the similarities, key differences remain between the two, perhaps made all the more important when it comes to the crunch.
The first difference concerns the types of projects that Dubai has undertaken and the amount of debt it used to fund them.
In the past few years, Dubai went on a construction spree that included building the world’s tallest tower, the 818-metre-high Burj Dubai, and a man-made island called Palm Jumeirah.
Consider the amounts that was poured into those projects: The Burj Dubai building alone will cost an estimated US$1 billion, while US$1.5 billion was invested in the Atlantis hotel on the palm-shaped island. It is fair to ask if there is ever going to be demand for these projects, and will the tourist numbers be as claimed – a staggering 10 million hotel visitors annually by 2010. Or is it just mere hubris driven by the bubble of the past few years?
Of the US$99.6 billion worth of assets in Dubai World, close to 60 per cent or US$59.3 billion is leverage. With an unpredictable stream of cashflow, a long time horizon plus a debt-ratio higher than one, the credit crisis looks like an event that was waiting to happen.
In Singapore, state-owned Temasek Holdings started in the 1970s on a more solid footing by investing in infrastructure and providing basic services for the economy.
Temasek-linked companies such as SIA and PSA are in strategic sectors that are expected to do well in the long run, and the government investment firm certainly did not undertake any lavish property projects on the scale of Burj Dubai or the Palm developments.
Secondly, Dubai lacks a significant electronics manufacturing base that lends support to its export dollars, as the factory output accounts for just under 15 per cent of GDP. A look at the sectors into which it has poured its money (property, tourism, financial services, etc) reveals that they are all services-related – meaning that export flows can easily reverse in a matter of months, if not weeks. This inherently hampers Dubai’s ability to meet its short-term obligations especially in times of economic crisis.
Cushion
In contrast, manufacturing has been a significant contributor to Singapore’s economic growth for many years, and still accounts for about a fifth of economic activity here. This not only acts as a cushion for any downturn in the services sector, but the returns are often less volatile.
Indeed, Dubai represents all that was wrong with the pre-crisis financial world – built on hubris, loans, speculation, and the fallacy that the champagne-popping party could continue forever.
But, as the saying goes, all good things must come to an end. And the lesson from Dubai’s experience is this: without a development plan backed by fundamentals and prudence, even an oasis in the sand will end up as a mere mirage in the desert.
Source: Business Times, 4 Dec 2009
IT IS really a contrasting tale of two cities.
Singapore, which is fundamentally strong, is now bracing itself for an economic recovery next year, while debt-ridden Dubai finds itself under the spotlight due to its credit woes.
But as recently as four years ago, Dubai was portraying itself as the ‘Singapore’ of the Middle East, not least because of the fact that the tiny Gulf state’s economic model closely mirrors that of the South-east Asian country in the last decade.
For example, both resource- scarce city states poured vast amounts of resources into aviation, transport, financial services and healthcare – sectors that will presumably boost the country’s development and attract plenty of foreign direct investment (FDI).
In Dubai’s case, its airport was pitched as a strategic stopover point between Asia and Europe, much like Changi Airport, while flag carrier Emirates sought to rival Singapore Airlines (SIA) by adding to its fleet of carriers, even in the face of the economic downturn.
Then there is the Dubai Aerospace Enterprise set up in 2006 to capture some airport development and operations projects in emerging markets, while Dubai Ports beat PSA International to buy P&O Ports for £3.9 billion (S$8.95 billion) in 2007.
Dubai, the world’s sixth-largest container port handler, wanted to run more terminals in China and India to tap growing economies and challenge rivals such as Singapore’s PSA International.
The Gulf state also challenged Singapore in the US$25 billion market for marine oil by setting up an exchange in 2005 to allow futures trading in marine oil at the port of Fujairah, one of the world’s top three fuel stops for ships.
The dizzying pace of development certainly represents a deliberate part of the ruling family’s strategy to transform the Gulf state into a world-class hub.
Construction spree
But beyond the similarities, key differences remain between the two, perhaps made all the more important when it comes to the crunch.
The first difference concerns the types of projects that Dubai has undertaken and the amount of debt it used to fund them.
In the past few years, Dubai went on a construction spree that included building the world’s tallest tower, the 818-metre-high Burj Dubai, and a man-made island called Palm Jumeirah.
Consider the amounts that was poured into those projects: The Burj Dubai building alone will cost an estimated US$1 billion, while US$1.5 billion was invested in the Atlantis hotel on the palm-shaped island. It is fair to ask if there is ever going to be demand for these projects, and will the tourist numbers be as claimed – a staggering 10 million hotel visitors annually by 2010. Or is it just mere hubris driven by the bubble of the past few years?
Of the US$99.6 billion worth of assets in Dubai World, close to 60 per cent or US$59.3 billion is leverage. With an unpredictable stream of cashflow, a long time horizon plus a debt-ratio higher than one, the credit crisis looks like an event that was waiting to happen.
In Singapore, state-owned Temasek Holdings started in the 1970s on a more solid footing by investing in infrastructure and providing basic services for the economy.
Temasek-linked companies such as SIA and PSA are in strategic sectors that are expected to do well in the long run, and the government investment firm certainly did not undertake any lavish property projects on the scale of Burj Dubai or the Palm developments.
Secondly, Dubai lacks a significant electronics manufacturing base that lends support to its export dollars, as the factory output accounts for just under 15 per cent of GDP. A look at the sectors into which it has poured its money (property, tourism, financial services, etc) reveals that they are all services-related – meaning that export flows can easily reverse in a matter of months, if not weeks. This inherently hampers Dubai’s ability to meet its short-term obligations especially in times of economic crisis.
Cushion
In contrast, manufacturing has been a significant contributor to Singapore’s economic growth for many years, and still accounts for about a fifth of economic activity here. This not only acts as a cushion for any downturn in the services sector, but the returns are often less volatile.
Indeed, Dubai represents all that was wrong with the pre-crisis financial world – built on hubris, loans, speculation, and the fallacy that the champagne-popping party could continue forever.
But, as the saying goes, all good things must come to an end. And the lesson from Dubai’s experience is this: without a development plan backed by fundamentals and prudence, even an oasis in the sand will end up as a mere mirage in the desert.
Source: Business Times, 4 Dec 2009
Tuesday, December 1, 2009
Large-scale asset sale may be on the cards
DUBAI: Dubai World's debt crisis is likely to result in a large-scale sell-off of assets as varied as the QE2 cruise liner, Turnberry championship golf course, and a raft of properties worldwide.
Mr Paul Reynolds, head of Rothschild's advisory operations in the Middle East, was this week asked to assess the group's assets alongside Mr Aidan Birkett of Deloitte, who was appointed last Wednesday.
A spokesman for the Dubai Department of Finance told Britain's Telegraph newspaper that all options and asset sales would be considered, except for the DP World subsidiary that bought P&O, the British port company.
'I'm sure all of the assets of Dubai World will be reviewed,' he was quoted as saying.
'It's part of the restructuring process, though it's too early to say whether there's any sale in mind.'
Dubai rocked the financial world last Wednesday when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, and Nakheel, builder of its palm-shaped islands, to agree to let it cease payments on billions of dollars of debts until a restructuring agreement has been negotiated.
Abu Dhabi - the richest state in the United Arab Emirates (UAE), the federation to which Dubai belongs - is seen as one of the main buyers of Dubai's assets. Analysts say Abu Dhabi will probably insist on Dubai selling some assets as part of its conditions for rescuing it.
On Sunday, the Abu Dhabi-based UAE central bank moved to quell fears that Dubai's debt crisis could escalate, by promising to provide liquidity for both foreign and local banks that had been expecting repayments, effectively covering any short- term losses.
Last year, when rumours about Dubai's debt problems first surfaced, sources said Abu Dhabi had offered to buy Emirates airline, but Dubai had refused to part with its flagship carrier.
Abu Dhabi is also said to be interested in Emaar, the property company that owns the Burj Dubai skyscraper, the Dubai Mall shopping centre, and Dubai's aluminium company Dubal, the Telegraph reported.
Dubai World's venture capital arm, Istithmar, owns stakes in global assets, including MGM Mirage, the Las Vegas gambling operation; Barneys, the New York department store; Cirque du Soleil; South African entrepreneur Sol Kerzner's hotel chain; and Standard Chartered Bank.
The group's London properties include Adelphi on The Strand and the Grand Buildings in Trafalgar Square.
Source: Straits Times, 1 Dec 2009
Mr Paul Reynolds, head of Rothschild's advisory operations in the Middle East, was this week asked to assess the group's assets alongside Mr Aidan Birkett of Deloitte, who was appointed last Wednesday.
A spokesman for the Dubai Department of Finance told Britain's Telegraph newspaper that all options and asset sales would be considered, except for the DP World subsidiary that bought P&O, the British port company.
'I'm sure all of the assets of Dubai World will be reviewed,' he was quoted as saying.
'It's part of the restructuring process, though it's too early to say whether there's any sale in mind.'
Dubai rocked the financial world last Wednesday when it said it would ask creditors of Dubai World, the conglomerate behind its rapid expansion, and Nakheel, builder of its palm-shaped islands, to agree to let it cease payments on billions of dollars of debts until a restructuring agreement has been negotiated.
Abu Dhabi - the richest state in the United Arab Emirates (UAE), the federation to which Dubai belongs - is seen as one of the main buyers of Dubai's assets. Analysts say Abu Dhabi will probably insist on Dubai selling some assets as part of its conditions for rescuing it.
On Sunday, the Abu Dhabi-based UAE central bank moved to quell fears that Dubai's debt crisis could escalate, by promising to provide liquidity for both foreign and local banks that had been expecting repayments, effectively covering any short- term losses.
Last year, when rumours about Dubai's debt problems first surfaced, sources said Abu Dhabi had offered to buy Emirates airline, but Dubai had refused to part with its flagship carrier.
Abu Dhabi is also said to be interested in Emaar, the property company that owns the Burj Dubai skyscraper, the Dubai Mall shopping centre, and Dubai's aluminium company Dubal, the Telegraph reported.
Dubai World's venture capital arm, Istithmar, owns stakes in global assets, including MGM Mirage, the Las Vegas gambling operation; Barneys, the New York department store; Cirque du Soleil; South African entrepreneur Sol Kerzner's hotel chain; and Standard Chartered Bank.
The group's London properties include Adelphi on The Strand and the Grand Buildings in Trafalgar Square.
Source: Straits Times, 1 Dec 2009
Monday, November 30, 2009
Dubai's woes could hit the fragile US real estate market
Dubai World, with US$59b of debt, set off a global stock market selloff last week
(NEW YORK) Dubai's debt woes could further unhinge an already fragile US commercial real estate, as it illustrates the importance of that tiny country to global investors in an increasingly interconnected world.
A state-owned investment conglomerate Dubai World, with US$59 billion of liabilities, set off a global stock market selloff last week after it said it wants to restructure its debt, including at its property subsidiary Nakheel.
'This downturn has had more of a global impact,' said Tony Ciochetti, chairman of Massachusetts Institute of Technology's Center for Real Estate in Cambridge, Massachusetts.
'As I try to explain to my students, with a global economy, we're all attached at the hip financially in some way, shape or form,' he added.
The Dubai news also cast doubt over the strength of the fledgling US economic recovery, and the prospects for a bottoming of property prices.
On Friday alone, the Dow Jones US Real Estate Index fell 2.9 per cent, nearly twice the decline of broader US market indexes. 'Dubai may have to unload some very prestigious properties at distressed prices and this will drive the price of all commercial real estate lower,' wrote Richard Bove, a banking analyst at Rochdale Securities in Lutz, Florida.
In the US, Dubai World's portfolio includes several well-known properties, and the fallout could have a larger impact on the entire real estate market.
The company is a partner with casino operator MGM Mirage in the US$8.5 billion CityCenter project, which would add 6,000 rooms to a Las Vegas Strip gambling corridor already saturated with unoccupied hotel rooms.
Nakheel, perhaps best known as the developer of Dubai's palm-shaped islands, also carries the Mandarin Oriental and W hotels in New York in its portfolio, and has a 50 per cent stake in the Fontainebleau Miami Beach resort.
And, through its Istithmar affiliate, Dubai World controls the upscale retailer Barneys New York Inc.
The main threat to US commercial property from Dubai World woes may be 'potential for contagion', said Sam Chandan, chief economist at Real Estate Econometrics LLC in New York. 'It has the potential to spill over into the broader perception of real estate development and real estate as being a very risky area for exposure,' Mr Chandan said.
Many have already been burned.
US commercial real estate values have already fallen 42.9 per cent from their 2007 peak, Moody's Investors Service said. Last month, delinquencies on US commercial real estate loans that were packaged into commercial mortgage-backed securities reached 4.8 per cent, more than six times the year earlier level, according to Trepp LLC in New York.
In a Nov 23 report, Moody's analyst Nick Levidy said prices could bottom at 45-55 per cent below their peak, implying an additional 5-28 per cent decline, but in a 'stress case' could drop 65 per cent from their peak. Like US investors, foreign investors were enticed through much of this decade to buy US real estate aided by cheap credit and the hope that property prices would steadily rise for a long time.
Currency fluctuations also provided a boost. And the US dollar lost about one-third of its value against a basket of currencies since late 2002, making it easier for foreign investors to scoop up US real estate even when valuations grew too rich for investors at home.
Dubai World's holdings go far beyond real estate. It has a 20 per cent stake in Canada's Cirque du Soleil, and also invests in the global bank Standard Chartered Plc and New York boutique investment bank Perella Weinberg Partners.
Other investments go farther afield - or under water. Dubai World is suing a former executive in a case arising from a wayward foray into submarine financing. But Mr Ciochetti suggested that it is premature to quantify Dubai World's impact on US commercial real estate.
'It is hard to focus on any one particular participant and then generalise about the whole market,' he said. 'It illustrates that very few places and participants in the commercial real estate market are totally exempt from the global economic crisis.' - Reuters
Source: Business Times, 30 Nov 2009
(NEW YORK) Dubai's debt woes could further unhinge an already fragile US commercial real estate, as it illustrates the importance of that tiny country to global investors in an increasingly interconnected world.
A state-owned investment conglomerate Dubai World, with US$59 billion of liabilities, set off a global stock market selloff last week after it said it wants to restructure its debt, including at its property subsidiary Nakheel.
'This downturn has had more of a global impact,' said Tony Ciochetti, chairman of Massachusetts Institute of Technology's Center for Real Estate in Cambridge, Massachusetts.
'As I try to explain to my students, with a global economy, we're all attached at the hip financially in some way, shape or form,' he added.
The Dubai news also cast doubt over the strength of the fledgling US economic recovery, and the prospects for a bottoming of property prices.
On Friday alone, the Dow Jones US Real Estate Index fell 2.9 per cent, nearly twice the decline of broader US market indexes. 'Dubai may have to unload some very prestigious properties at distressed prices and this will drive the price of all commercial real estate lower,' wrote Richard Bove, a banking analyst at Rochdale Securities in Lutz, Florida.
In the US, Dubai World's portfolio includes several well-known properties, and the fallout could have a larger impact on the entire real estate market.
The company is a partner with casino operator MGM Mirage in the US$8.5 billion CityCenter project, which would add 6,000 rooms to a Las Vegas Strip gambling corridor already saturated with unoccupied hotel rooms.
Nakheel, perhaps best known as the developer of Dubai's palm-shaped islands, also carries the Mandarin Oriental and W hotels in New York in its portfolio, and has a 50 per cent stake in the Fontainebleau Miami Beach resort.
And, through its Istithmar affiliate, Dubai World controls the upscale retailer Barneys New York Inc.
The main threat to US commercial property from Dubai World woes may be 'potential for contagion', said Sam Chandan, chief economist at Real Estate Econometrics LLC in New York. 'It has the potential to spill over into the broader perception of real estate development and real estate as being a very risky area for exposure,' Mr Chandan said.
Many have already been burned.
US commercial real estate values have already fallen 42.9 per cent from their 2007 peak, Moody's Investors Service said. Last month, delinquencies on US commercial real estate loans that were packaged into commercial mortgage-backed securities reached 4.8 per cent, more than six times the year earlier level, according to Trepp LLC in New York.
In a Nov 23 report, Moody's analyst Nick Levidy said prices could bottom at 45-55 per cent below their peak, implying an additional 5-28 per cent decline, but in a 'stress case' could drop 65 per cent from their peak. Like US investors, foreign investors were enticed through much of this decade to buy US real estate aided by cheap credit and the hope that property prices would steadily rise for a long time.
Currency fluctuations also provided a boost. And the US dollar lost about one-third of its value against a basket of currencies since late 2002, making it easier for foreign investors to scoop up US real estate even when valuations grew too rich for investors at home.
Dubai World's holdings go far beyond real estate. It has a 20 per cent stake in Canada's Cirque du Soleil, and also invests in the global bank Standard Chartered Plc and New York boutique investment bank Perella Weinberg Partners.
Other investments go farther afield - or under water. Dubai World is suing a former executive in a case arising from a wayward foray into submarine financing. But Mr Ciochetti suggested that it is premature to quantify Dubai World's impact on US commercial real estate.
'It is hard to focus on any one particular participant and then generalise about the whole market,' he said. 'It illustrates that very few places and participants in the commercial real estate market are totally exempt from the global economic crisis.' - Reuters
Source: Business Times, 30 Nov 2009
Saturday, November 28, 2009
S’pore firms shrug off Dubai default
THE debt troubles of Dubai World appear to have had a limited impact on Singapore companies with links to the Gulf emirate.
Property group City Developments (CDL), which tied up with the Dubai government investment company to develop the billion-dollar South Beach site near Suntec City, said it does not expect ‘any impact at all’ on the site’s development.
‘Dubai World holds only a one-third share’ of the development, a CDL spokesman said yesterday. CDL has another third, and the last third belongs to the United States-based El-Ad Group.
The spokesman told The Straits Times that no further capital needs to be pumped into the project at present.
‘However, when the time comes for construction to proceed, all partners will be required to put in their share of additional funds. Should Dubai World decide not to contribute their proportionate share for whatever reasons, their shareholding will be diluted.’
Dubai World had asked on Thursday for six more months to repay its debts, sending global financial markets into a panic over Dubai’s possible bankruptcy.
Analysts singled out banks as among the most vulnerable to a Dubai debt default. The news could have a ‘meaningful impact’ on banks across Asia, said Mr Daniel Tabbush, a banking analyst at CLSA in Bangkok.
He listed Standard Chartered, HSBC and Singapore’s DBS Group as the most exposed in the region.
DBS has a branch in Dubai that was opened in 2006, marking the bank’s first foray into Islamic finance. DBS could not be reached for comment yesterday.
Along with United Overseas Bank and OCBC Bank, DBS is also part of a syndicate helping to finance CDL’s South Beach project.
Market observers said the banks that have exposure to Dubai only through the South Beach project are unlikely to be affected by Dubai’s financial problems, as they will have collateral in the form of the property.
Public transport company SMRT also has a partnership with Nakheel, a property developer that works under the umbrella of the Dubai World group.
SMRT has a six-year contract worth about $120 million with Nakheel to operate and maintain a monorail running through the Palm Jumeirah development in Dubai.
In response to queries about how Dubai’s debt difficulties would affect SMRT, chief operating officer Yeo Meng Hin said the impact to the monorail’s operations, if any, would be minimal.
‘We are long-term partners with Nakheel, and will continue to work closely with its management during this challenging time,’ he said.
Other Singapore companies that have crossed paths with Dubai World include Labroy Marine and Pan-United Marine. The Dubai firm bought both Singapore shipyards in 2007 for about US$2 billion (S$2.7 billion).
Earlier that year, Dubai World’s sister firm Dubai Ports World grabbed headlines in Singapore when it beat PSA International to buy P&O Ports for £3.9 billion (S$8.8 billion).
Source: Straits Times, 28 Nov 2009
Property group City Developments (CDL), which tied up with the Dubai government investment company to develop the billion-dollar South Beach site near Suntec City, said it does not expect ‘any impact at all’ on the site’s development.
‘Dubai World holds only a one-third share’ of the development, a CDL spokesman said yesterday. CDL has another third, and the last third belongs to the United States-based El-Ad Group.
The spokesman told The Straits Times that no further capital needs to be pumped into the project at present.
‘However, when the time comes for construction to proceed, all partners will be required to put in their share of additional funds. Should Dubai World decide not to contribute their proportionate share for whatever reasons, their shareholding will be diluted.’
Dubai World had asked on Thursday for six more months to repay its debts, sending global financial markets into a panic over Dubai’s possible bankruptcy.
Analysts singled out banks as among the most vulnerable to a Dubai debt default. The news could have a ‘meaningful impact’ on banks across Asia, said Mr Daniel Tabbush, a banking analyst at CLSA in Bangkok.
He listed Standard Chartered, HSBC and Singapore’s DBS Group as the most exposed in the region.
DBS has a branch in Dubai that was opened in 2006, marking the bank’s first foray into Islamic finance. DBS could not be reached for comment yesterday.
Along with United Overseas Bank and OCBC Bank, DBS is also part of a syndicate helping to finance CDL’s South Beach project.
Market observers said the banks that have exposure to Dubai only through the South Beach project are unlikely to be affected by Dubai’s financial problems, as they will have collateral in the form of the property.
Public transport company SMRT also has a partnership with Nakheel, a property developer that works under the umbrella of the Dubai World group.
SMRT has a six-year contract worth about $120 million with Nakheel to operate and maintain a monorail running through the Palm Jumeirah development in Dubai.
In response to queries about how Dubai’s debt difficulties would affect SMRT, chief operating officer Yeo Meng Hin said the impact to the monorail’s operations, if any, would be minimal.
‘We are long-term partners with Nakheel, and will continue to work closely with its management during this challenging time,’ he said.
Other Singapore companies that have crossed paths with Dubai World include Labroy Marine and Pan-United Marine. The Dubai firm bought both Singapore shipyards in 2007 for about US$2 billion (S$2.7 billion).
Earlier that year, Dubai World’s sister firm Dubai Ports World grabbed headlines in Singapore when it beat PSA International to buy P&O Ports for £3.9 billion (S$8.8 billion).
Source: Straits Times, 28 Nov 2009
From fishing village to desert paradise in 40 years
IN A land seemingly built for the purposes of conspicuous consumption, Dubai never lacked extravagant icons of success.
The most extravagant – and most emblematic of the once sleepy fishing village’s transformation to oasis playground for the rich – were surely the palm tree and the sail.
In keeping with the tiny Gulf emirate’s grandiose vision, both were artificial. One was a set of man-made islands in the shape of palm trees and the other the sail-shaped Burj Al Arab, the world’s most expensive hotel.
Then there was the man-made harbour, the largest in the world, built at Jebel Ali while a free-trade zone was created around the port, catapulting Dubai into the league of major international business hubs.
Billing itself as a safe haven within a volatile region for investors and tourists alike, Dubai, which discovered oil in 1966, tripled its economy to US$34.5 billion (S$47.9 billion) in the 10 years to 2006 and achieved double-digit growth every year until the financial crisis struck.
Its expansion was relentless. By last year, foreign direct investment into Dubai totalled US$21 billion, according to the Financial Times.
The Gulf emirate established itself as the region’s trade and tourism hub, developing businesses such as port operator DP World that became leaders in their field.
It also set out to become a world-class financial centre, competing with the likes of New York and London and boasting an edge in the burgeoning area of Islamic finance.
In 2007, Dubai and Qatar became the two biggest shareholders of the London Stock Exchange, the third-largest bourse in the world.
Within its own borders, Dubai embarked on a massive six-year building boom that turned sand dunes into a glittering metropolis and the city into a magnet for the young, rich and glamorous.
No project was too lavish for Dubai. It is home to the world’s biggest shopping mall – the 1,200-shop Dubai Mall – and will have the world’s tallest building when the 160-storey Burj Dubai is completed next year at an estimated cost of US$1 billion.
The Burj Al Arab hotel was itself the tallest building in the world when it was completed in 1999. The hotel gave itself a seven-star rating – the first in the world – and watched as the publicity, room rates and bookings rocketed.
Dubai made the unthinkable possible with Ski Dubai, which opened in 2006 to offer the ultimate in luxury: skiing in the desert, on one of the world’s largest indoor ski slopes with fresh powder all year round.
Celebrities converged on Dubai’s sands, with David Beckham and Brad Pitt reportedly owning villas in the Palm Jumeirah development, the only one of three planned palm-tree shaped islands that has been completed.
The future of the other two Palm islands is now up in the air – much like that of Dubai itself.
Source: Straits Times, 28 Nov 2009
The most extravagant – and most emblematic of the once sleepy fishing village’s transformation to oasis playground for the rich – were surely the palm tree and the sail.
In keeping with the tiny Gulf emirate’s grandiose vision, both were artificial. One was a set of man-made islands in the shape of palm trees and the other the sail-shaped Burj Al Arab, the world’s most expensive hotel.
Then there was the man-made harbour, the largest in the world, built at Jebel Ali while a free-trade zone was created around the port, catapulting Dubai into the league of major international business hubs.
Billing itself as a safe haven within a volatile region for investors and tourists alike, Dubai, which discovered oil in 1966, tripled its economy to US$34.5 billion (S$47.9 billion) in the 10 years to 2006 and achieved double-digit growth every year until the financial crisis struck.
Its expansion was relentless. By last year, foreign direct investment into Dubai totalled US$21 billion, according to the Financial Times.
The Gulf emirate established itself as the region’s trade and tourism hub, developing businesses such as port operator DP World that became leaders in their field.
It also set out to become a world-class financial centre, competing with the likes of New York and London and boasting an edge in the burgeoning area of Islamic finance.
In 2007, Dubai and Qatar became the two biggest shareholders of the London Stock Exchange, the third-largest bourse in the world.
Within its own borders, Dubai embarked on a massive six-year building boom that turned sand dunes into a glittering metropolis and the city into a magnet for the young, rich and glamorous.
No project was too lavish for Dubai. It is home to the world’s biggest shopping mall – the 1,200-shop Dubai Mall – and will have the world’s tallest building when the 160-storey Burj Dubai is completed next year at an estimated cost of US$1 billion.
The Burj Al Arab hotel was itself the tallest building in the world when it was completed in 1999. The hotel gave itself a seven-star rating – the first in the world – and watched as the publicity, room rates and bookings rocketed.
Dubai made the unthinkable possible with Ski Dubai, which opened in 2006 to offer the ultimate in luxury: skiing in the desert, on one of the world’s largest indoor ski slopes with fresh powder all year round.
Celebrities converged on Dubai’s sands, with David Beckham and Brad Pitt reportedly owning villas in the Palm Jumeirah development, the only one of three planned palm-tree shaped islands that has been completed.
The future of the other two Palm islands is now up in the air – much like that of Dubai itself.
Source: Straits Times, 28 Nov 2009
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