RT @uae_detainees: Today 20th April2013
Is one year anniversary of detention of
Sheikh Sultan Bin Kayed AlQassimi
#القاسمي_سجين_المبدأ http… 7 years ago
RT @ASKayed: Very surprised to see the order of imprisonment issued on the 13th Sep 2012 where my father was really detained on the 20th Ap… 7 years ago
RT @ASKayed: My father Dr.Sultan kayed Alqasimi spent
142 days in RAK Ruler's palace
181 days in an unknown prison
43 days in a deportation… 7 years ago
RT @mattjduffy: Latest #UAE citizen arrested on charge of spreading false info. "False news" laws incompatible with free speech. http:// ... 7 years ago
Criminal Complaint filed in Germany against Sheikh Maktoum Hasher Maktoum Juma Al Maktoum CEO of Dubai Developer Al Fajer Properties The Dubai Sheikh who mislead and extort a German Couple Germany – Dubai 2011 A German elderly couple , today 80 + 50 years old who have been Dubai Tourists since a decade, bought in 2005 an apartment at Nakheel´s Dubai Residen […]
source Human Rights Watch www.hrw.org (Beirut) - The United Arab Emirates attorney general should immediately drop all charges against five pro-democracy activists to halt their trial, Human Rights Watch said today. The charges of "humiliating" top officials relate solely to the defendants' peaceful use of speech to criticize the UAE governmen […]
June 5, 2011After 21 hearings, Chris O'Donnell, the Australian chief executive of Dubai's major developer, Nakheel, came to the defence of his former colleagues Matthew Joyce and Marcus Lee. Mr Joyce and Mr Lee are accused of profiting from the sale of land that had been earmarked for a colossal high-rise development, which was to include the futur […]
Dubai June 7, 2011 Nakheel said on Wednesday that its CEO Chris O'Donnell had left the company "after completing his contract terms". O'Donnell, an Australian who joined the developer in 2006, said he had decided to leave Nakheel following five years spent with the company, the statement added. O'Donnell has overseen a traumatic time […]
Dubai property developer Damac said on Tuesday it had filed an international arbitration case against Egypt over a land dispute and the conviction of its chairman and owner, Hussain Sajwani.A Cairo court last week sentenced Sajwani in his absence to jail and ordered him to pay a $40.5 million fine in connection with his 2006 purchase of land at Egypt's […]
Investors in Dubai Palm Jumeirah’s Golden Mile complex will this week serve the developer behind the project with a legal ultimatum to hand over their units or issue them with a refund.Up to ten investors in the luxury complex plan to issue Souq Residences with legal notice in a bid to force a resolution to a dispute that has been ongoing for more than a yea […]
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HFZA’s participation in Gulfood, which is the world’s largest annual food and beverage trade exhibition, comes as part of its commitment to fulfilling the current and evolving needs of the local, regional, and global food sector
The agreement will allow for enhanced exchange of information, data and expertise concerning the regulation and management of maritime activities, infrastructure developments and facilities across Abu Dhabi’s waterways
A dream job in the Dubai property market turned into a nightmare for Marcus Lee when he was imprisoned on a false bribery charge. In a new book, he describes how he survived five years of living hell, sustained by the support of his wife.
Extract of the Book:
JULIE: I spoke to Matt Joyce’s wife, Ange. She said she had a number for Sultan Ahmed bin Sulayem, the chairman of Dubai World, Nakheel’s parent company, and she would call him to try to get information. She seemed just as mystified as I was.
MARCUS: On the night of January 28, Matt and I were put in the back of a blacked-out 4WD. We started to ask each other questions when one of the Emiratis said, “No talking.” Speaking in a low murmur, I said I was totally confused. Matt dropped a bombshell. He said, “I helped this company open up a trust account.” I said, “What? Which company?” He said, “I helped Prudentia to open up an escrow account, because they couldn’t open up a bank account in Dubai.”
The headline for this article in Arabian Business was: Nakheel damaging Dubai´s Reputation “two million times for a few dirhams” – Al Habtoor
In an interview with Arabian Business on Sunday Mr. Khalaf Al Habtoor said :Nakheel’s decision to charge for beach access on its flagship Palm Jumeirah project is “dangerous” and “unacceptable” . He strongly hit out at Nakheel, claiming the decision would never have been approved by the Dubai government.
“It was 100 percent [damaging] and unacceptable. If I am buying a house and using the beach and later told I have to pay for the beach, this is abnormal. This is damaging the reputation of my country,” he said.
After 21 hearings, Chris O’Donnell, the Australian chief executive of Dubai’s major developer, Nakheel, came to the defence of his former colleagues Matthew Joyce and Marcus Lee.
Mr Joyce and Mr Lee are accused of profiting from the sale of land that had been earmarked for a colossal high-rise development, which was to include the futuristic construction known as the Atrium, but which has never got off the ground. In a very Australianstory, the two men are accused of deceiving the buyer of the plot, the Gold Coast developer Sunland, and harming Nakheel, Dubai Waterfront’s parent company.
Since their arrest in January 2009, Mr Joyce and Mr Lee have maintained they are innocent. Their passports confiscated, neither allowed to work, they are trapped with their families in a city where food prices are soaring and rent remains expensive despite the property crash. If convicted, the men could face long jail terms in the Middle East.
Mr O’Donnell’s testimony may be crucial in proving the sale and value of Plot D17 was approved by Nakheel’s executive committee and there was no deception. Mr Joyce was Dubai Waterfront’s managing director and Mr Lee its commercial manager.
What Mr O’Donnell said in court directly contradicted the Dubai prosecutor’s claims that Nakheel lost millions as a result of the $60 million sale.
The drama began when Mr Joyce and Mr Lee were arrested amid the global financial crisis and the Dubai government’s crackdown on fraud. Dozens of other senior executives were arrested and charged with fraud in 20The Australian men were locked in prison for nine months, and released in October 2009 once they each raised $295,000 bail. While Dubai police allege the Australian men profited from the sale of the land, testimony from Mohammad Mustafa, of the Dubai government’s Financial Audit Department, concluded that Mr Lee did not receive any money; nor did he benefit or gain from the transactions.
Dubai Former Board Member of Dubai World sued Naheel
A former board member of Dubai World has sued Nakheel after being denied a 15 percent ‘staff discount’ on a deal involving plots of land on Palm Jumeirah.
According to documents issued to the Dubai World Tribunal on March 23, Ahmed Butti Ahmed Al Muhairi, director general of Dubai Customs, planned to purchase two plots of land on Palm Jumeirah and sought to use a 15 percent staff discount available to Nakheel employees.
DUBAI // Investors in one of Palm Jumeirah’s biggest developments say they have been left out in the cold by a Dh1 billion (US$272.3 million) legal dispute between Souq Residences, the company behind the project and Nakheel, which built the group of islands.
The investors in the Golden Mile who recently formed a group to advocate for their interests say they have yet to move in six years after the project’s launch, even though construction has been completed and they have paid in full for their properties.
“We’ve had immense difficulty,” said Suhail Rehman, one of the investors. “People have lost two years of rent on fully paid-up assets.”
“We’re being reminded of this by cases against some of the government and private developers. It’s not just a matter of finances but also of putting a legal system in place to handle these disputes.”
A property owner in Nakheel’s Jumeirah Islands development has won a Dh2.5 million (US$680,624) cash payout from the developer, the first such award from the Dubai World Tribunal.
It was also the first time the Tribunal enforced an arbitration decision from another court, which could set a precedent for other disputes involving the developer.
The Dubai International Arbitration Centre last May ruled that Vinod Kumar Dang should be paid Dh2.5m plus interest and legal costs in a row over construction defects in a villa. The property owner then took the matter before the Tribunal to have the award verified and paid out.
The Tribunal is a special body hearing all cases relating to Dubai World, the government-owned business group that is finalising a $24.9 billion debt restructuring. Nakheel, which built Jumeirah Islands, is owned by Dubai World.
Nakheel declined to comment.
Lawyers for Jumeirah Islands had argued that the arbitration award should be struck out, claiming there were technical faults in the language of the judgment. Mr Dang’s lawyers countered that the award was made legitimately in arbitration and that it was the role of the Tribunal to enforce such judgments.
source 7 days Sara Qurashi, 11, launched ‘Justice For My Dad’ in May after her father Safi, owner of Great Britain on The World islands, was sentenced to four years in prison for bouncing two cheques.
The father-of-three has now been given a further three years to serve behind bars for a third stopped cheque. The three cheques relate to a property deal with a Russian client and total dhs200 million. Qurashi denies any wrongdoing and says the cheques should never have been cashed. Sara said:
“My dad had lawyers and he believed justice would be done. But now my dad has been given a sentence of seven years in jail. So that’s why I am trying to help him.”
DUBAI // A British investor who is appealing a seven-year
sentence for three counts of issuing bad cheques dramatically dismissed his defence team in court yesterday.
Safi Qurashi appeared at the Dubai Court of Appeals on a charge of dishonouring a Dh179 million cheque to a Dubai-based trading company.
Mr.Qurashi denied the charge before Presiding Judge Adnan al Farra. He said he had presented the cheque as security to an investor he represented in a property deal at The World islands project.
In a surprise move, the defendant then asked for the dismissal of his legal representation. “I would like to submit my own defence,” SQ told the court.
Advocate Mariam al Falasi, from law firm Hussain Lootah & Associates, told the court her firm had not been notified of any dismissal and presented her power of attorney letter to the court.
Nakheel PJSC began making payments to its biggest contractors as the Dubai World-owned property company seeks to alter terms on $10.5 billion of unpaid bills and loans amid falling property prices in the emirate.
Nakheel started making 40 percent cash payment to trade creditors, according to a company statement today. “The announcement marks significant progress in our recapitalization plan following on from the initial payments to trade creditors of 500,000 dirhams or less which commenced in March.”
Nakheel, the builder of palm-shaped islands off Dubai’s coast, said in March that trade creditors would be offered 100 percent recovery of their claims — 40 percent through a cash payment and 60 percent through a publicly tradable Islamic bond, paying 10 percent return annually. The Dubai government in March pledged to pump $8 billion into Nakheel and said it will take over its ownership from Dubai World after the restructuring. ….continue reading
An expert of the Financial Audit Department, Mohammed Mustafa Hussein, yesterday sent two new files to the Dubai Criminal Court hearing the case of Nakheel seafront. The court adjourned the case to June 15.
The Public Prosecution had accused the executive, commercial and legal directors of harming the company’s interest by selling land at a price lower than the market. The three made a profit of Dh44.1 million.
The day before, four defendants accused of receiving bribes and harming the interest of Nakheel, told the court that they wanted to listen to prosecution witnesses, especially Dubai World accounting expert Mohammed Abdullah Al Rawahi, who compiled the audit report. The court adjourned the case to June 10. continue reading…
Dubai May 21 (Bloomberg) — Nakheel PJSC, the Dubai World construction unit that received state cash to pay contractors and suppliers, may face an even greater challenge in deciding which of its planned projects to cancel.
In March, the company said it was evaluating its portfolio to identify “essential projects.” Nakheel will decide what buildings will be completed at the end of the restructuring process, a spokeswoman who declined to be named said by telephone yesterday.
Nakheel, the builder of palm-shaped islands off Dubai’s coast, is restructuring $10.5 billion of debt and has asked trade creditors to wait five years to receive full payment after falling behind on its bills. The Dubai government in March pledged to pump $8 billion in cash into Nakheel to help it pay contractors and suppliers and complete developments. Its unrealized plans include residential islands shaped like a world map and a coastal development that would be twice the size of Hong Kong Island.
If Nakheel’s capitalization plan is approved, it would lead to a “prompt completion” of projects that are close to being finished off, according to the developer’s website.
Dubai World, the state-owned holding company that includes Nakheel among its construction, hotel and shipping assets, yesterday reached an agreement with its main creditor group to restructure $23.5 billion of liabilities. The agreement includes extending repayment dates and converting loans into equity. continue reading
original published The National DUBAI // Five Nakheel marketing employees and a Ghobash Trading executive have been charged with defrauding Dubai World of more than Dh630,000 (US$171,500) through a bogus marketing deal.
The Emirati marketing manager A J, 35; his Lebanese deputy A M, 38; the Indian executives R S, 39, and J R 56; the Pakistani administrator O M, 27; and the Emirati Ghobash executive A K, 53, were charged with accepting bribes, damaging the public purse, forgery and aiding and abetting a crime using public funds.
They are being tried as public officials, which could earn them heavier sentences if convicted. The marketing manager allegedly accepted a Dh250,000 bribe to execute a phoney deal involving Montblanc gift items.
CRACKS have emerged in the fraud prosecution of two Australian executives in Dubai, raising questions about the claims of their alleged victim, Sunland, the Gold Coast-based developer that alleges it was duped in a property deal.
BusinessDay believes a series of emails will be relied on by the defendants in Dubai and in a civil case in Australia in an attempt to contradict Sunland’s claims that it was kept in the dark and that Matt Joyce and Marcus Lee misled it when they were working for Dubai Waterfront, the world’s biggest waterfront development.
Joyce and Lee spent nine months behind bars in the emirate until they were bailed in October to fight the fraud case, in which Sunland is the key witness for the prosecution. Its claims of being cheated are also central to the civil case it has launched against Joyce and other parties in the Federal Court, where it is trying to recoup millions lost on the venture.
In the Dubai and Federal Court proceedings, Sunland alleges it was misled in two critical ways when it bought Plot D17 in 2007 from the Dubai government-owned master developer Nakheel, parent company of Dubai Waterfront.
First, it says its chief operating officer in Dubai, David Brown, was duped into believing that another Australian company, Prudentia, had rights to buy the plot, so Sunland paid Prudentia a $14 million ”consulting fee” to release the land.
Second, Sunland claims Joyce, as managing director of Dubai Waterfront, failed to disclose a long-term friendship with Prudentia’s director, Angus Reed, with whom he attended Geelong Grammar.
But Brown sent an email to Joyce on August 19, 2007, which is expected to be relied on in Joyce’s defence in the Federal Court. Evidence for the plaintiff and the defence is yet to be heard in the proceedings, where the emails are expected to be presented in their full context.
On its face, Brown appears to acknowledge in the email the status of Plot D17, and that Sunland’s founder and executive director, Soheil Abedian, was informed. At this point, Sunland and Prudentia were negotiating a joint venture on the development plot.
”Thanks Matt,” Brown wrote, ”I got your message and yes Soheil is aware that Prudentia are still in negotiations with Nakheel and have not purchased the site. Jeff [Austin, Nakheel’s director of planning and development] and Anthony [Brearley, a Nakheel lawyer] have also made this clear. The fact they have not purchased D17 yet is better because [it will] allow us and Prudentia to agree to JV terms before we proceed to buy the site.”
In that email, Brown also told Joyce: ”I have informed Soheil of your prior relationship with Prudentia and your desire not to get involved.”
While it did not mention the old-school connection, this email may suggest that Joyce wanted to remain at arm’s length from the deal. Brown wrote that Sunland would instead continue to deal ”with Anthony, Marcus [Lee] and Jeff”.
But 10 days later, on August 29, in a 5.56am email to Joyce, Brown was ”extremely” disappointed to hear that Nakheel was negotiating to sell the plot to a Russian group, ”considering the time and effort that we and our JV partner has put into the purchase of this plot”. Again, this calls into question Sunland’s claim that it did not know Prudentia had secured no rights over the plot.
In Sunland’s statement of claim in the Federal Court, Brown alleges that Joyce told him by phone on the same day as this email that other potential buyers, including Russians, might offer a much bigger price for the plot.
Sunland alleges this was to pressure it to proceed with the purchase.
The time of this alleged call is unclear but in Joyce’s reply email to Brown, at 6.58am, he wrote that he doubted ”our guys would negotiate with another party without at least informing you” – unless it was the work of Nakheel Sales without Dubai Waterfront’s knowledge.
Prudentia and Angus Reed, in their defences lodged in the Federal Court, say they never suggested they owned Plot D17 or had sealed an option to buy it.
And they insist Sunland was fully aware of this.
Rather, they argue, Nakheel had merely regarded Prudentia as a ”preferred negotiator”. On August 10, 2007, Nakheel’s Jeff Austin had confirmed in a letter to Reed that it would be happy ”to grant you preliminary development and planning approval”.
”We also confirm that we would be happy to entertain discussions with your joint venture partner provided [they] are a proven developer like Prudentia,” Austin wrote.
Joyce’s defence in the Federal Court says a draft sale agreement had been sent to Prudentia on August 15 and Dubai Waterfront did not want to appear to be involved in ”gazumping” by dealing directly with the ”secondary developer”, Sunland.
In any event, the joint-venture negotiations collapsed and Sunland decided to buy Plot D17 alone.
A document tendered in court in Dubai, dated September 18, 2007, shows its board agreed on the purchase and to enter a memorandum of understanding with Prudentia.
The next day, David Brown and Angus Reed signed the deal, which included a strict confidentiality clause between the two parties. Sunland agreed to pay the consulting fee.
In return, Prudentia handed over its ”right to negotiate” with the master developer.
It has also been alleged that Marcus Lee, who was Dubai Waterfront’s head of commercial operations, had intervened to lower the price of Plot D17 to push the purchase along. Under this deal, it is alleged, Prudentia would take a ”land uplift” fee – the difference between the lower price and the market price.
But an internal Nakheel email on August 27, 2007, appears to clear Lee on this count. Nakheel’s then director of sales and marketing, Manal Shaheen, sent the email to her CEO, and to Joyce and Lee. Shaheen told them that her team had found the price of 125 UAE dirhams ($A37) a square foot was too high. She wrote that Lee’s ”business report should say market price which is 110 and then give me to sign”.
Lee is expected to rely on this exchange to support his consistent position: that he merely did his job according to instructions of his superiors at Nakheel. When he later recommended a price of 120 UAE dirhams a square foot, he will argue that it was approved by his superiors.
Shaheen’s email suggests that Nakheel was informed. Nakheel has not come to the defence of Lee, who says he never gained nor stood to gain from the land sale.
Nor has Nakheel defended Joyce, who says he was paid nothing in connection with the Sunland deal.
Sunland is yet to develop Plot D17. Prudentia and Reed, in their defence in Australia, claim this means it has lost the opportunity to reduce its alleged loss by about 24 million dirhams ($A7.16 million).
….The state of the Waterfront project is in some ways emblematic of the delays and disputes that have proliferated amid the decline of the property sector in Dubai during the global downturn, analysts say. It was the biggest project ever announced by one of Dubai’s biggest state-owned developers, an expression of the emirate’s ambitions. As Nakheel rethinks its largest projects and negotiates with banks over how it will repay money borrowed to finance such developments, much of the Waterfront is in a kind of limbo, Nakheel is struggling through its debt load, developers are in turn hesitant to build awaiting Nakheel’s fate, and investors are suing developers with dimming prospects for their investments.
Nakheel has made progress on two areas of the project, Veneto and Badrah, where the company was building villas. It has nearly finished a large canal that would form a central feature of the first phase, the Madinat al Arab. Individual plots of land facing the sea, where developers have said they would build high-rise luxury towers, are mostly undeveloped.
Investors who put their money with Omniyat Properties, a Dubai-based developer that bought land in the Waterfront and planned a project there, tell a common story. Attracted by Omniyat’s marketing machine – the company spent millions of dirhams advertising apartment buildings there – they poured money in during the run-up to the crisis, betting that Dubai’s soaring property market would keep rising. Now they are locked in a battle with the developer over how much construction it is contractually obliged to complete before demanding any more payments from them.
One of Omniyat’s projects, the Beachfront Living tower, sold more than 200 apartments and collected Dh314.7 million, according to an official review of the project’s escrow account by Caliber Middle East, a consultancy that advises Dubai’s Real Estate Regulatory Authority. Of that money and other funds Omniyat invested in the project, Caliber’s review shows, the company spent Dh237m on land payments and Dh101.6m on marketing expenses. Just Dh738,866 was spent on construction. The project has yet to move past the initial stages. continue reading the full original report
Dubai World property developers have undergone a new round of lay-offs, as chief restructuring advisor Aiden Birkett cuts the companies down to size and reduces costs.
Limitless has laid off about 20 per cent, or 55, of its staff. It currently has 220 employees, according to former staff. The company had about 500 staff at its peak.
“Limitless has reorganised and streamlined its operations as part of its ongoing strategy to reduce costs while continuing to maximise productivity,” a spokeswoman said. “Regrettably, this has impacted jobs.”
A Nakheel spokesperson said the company “continues to readjust its current business objectives and the resources to match as part of the restructuring process”. The company has previously let go of more than 1,000 people. It had 3,500 people at its peak.
The fate of these two property developers is the next big question in Dubai. They owe billions of dirhams in debt to banks and contractors. And they have giant, unfinished projects that need new capital to ever be complete. Nakheel’s Palm Jebel Ali – which is even larger than the finished Palm Jumeirah – comes to mind.
As does theArabian Canal, which was a planned 75km waterway through the desert outside Dubai. A short visit to the site this weekend found it completely abandoned, although the company did impressively dig several kilometres of it. (Check out the original multimedia package The National did on the canal here.) More pictures of the current state of the canal here.
Some analysts believe they will be merged together after selling off some assets to become a new Dubai developer with a new brand. Others believe that at least one of them will simply be liquidated. Another optimistic camp believes they will be restructured and continue operating. Either way, there are major changes afoot.
Top officials from the US and British governments are calling for transparency in the settlement of Dubai World’s US$22 billion (Dh80.8bn) debt restructuring, intensifying diplomatic pressure to conclude a deal with creditors.
Neal Wolin, the deputy secretary of the US Treasury, said he would call on officials during his visit to Dubai today to ensure openness in the restructuring of the emirate’s companies.
“I think it’s important that, as they work through these restructurings and these issues, that it be done in a way that is transparent so that we can all understand what’s going on,” Mr Wolin said. continue reading…
originaL source The National DUBAI // Defence lawyers in the Sama Dubai fraud trial tried to use the fallout from the recent restructuring of Dubai World to make their case to the Appeals Court yesterday that their client should not be tried as a public official.
AM, 42, an Emirati and former senior executive at Sama Dubai, was acquitted of charges of breach of duty in July.
Last month the public prosecution asked that he be retried, saying his acquittal came because he had been tried as a private employee.
The prosecutor, Abdel Rahman al Memari, told the court that since Sama Dubai was owned by Dubai Holdings – owned by Sheikh Mohammed bin Rashid, the Ruler of Dubai and Vice President of the UAE – AM should instead have been tried as a public official.
In that case, Mr al Memari said, AM would have been legally required to declare commissions he received, including five apartments valued at Dh2.7 million (US$735,000), and Dh200,000 in cash.
If accepted, that claim would have significant repercussions for a number of the fraud cases currently working their way through the Dubai courts, as many of the defendants could similarly be considered to be public officials.
However, in court, the defence pointed out that since Dubai World’s restructuring was announced last month, officials had stressed the arm’s-length relationship between the Government and some of the emirate’s biggest companies.
For the defence, Ali al Shamsi reminded the three Appeals Court judges of government statements saying it would not guarantee the debts of a conglomerate owned by Sheikh Mohammed.
“The recent press statements issued by government officials about the company owned by the Ruler of Dubai are a clear indication that these companies are not government-owned entities,” said Mr al Shamsi.
He referred to a television interview given by Abdel Rahman al Saleh, the director general of the Dubai Department of Finance, in which Mr al Saleh said: “Creditors need to take part of the responsibility for their decision to lend to the companies. They think Dubai World is part of the Government, which is not correct.”
Mr al Shamsi told the court that Dubai Holdings, like Dubai World, was not owned by the Dubai Government.
Its subsidiaries were registered as limited liability companies, he said, meaning that AM could not be charged as a public official.
Meanwhile, Saeed al Ghailani, who is representing a Syrian Damac property development manager, AH, 32, in the same trial, asked the court to subpoena Hussein Sajwani, the owner and chief executive of Damac Properties, to be cross-examined.
AH is accused of being complicit in the alleged bribes of the Sama Dubai employees as well as accepting Dh650,000.
Mr al Ghailani said his client acted according to the instructions of the owner of the company, Mr Sajwani.
For more than two weeks there was little word from Abu Dhabi, even as fears over Dubai’s debt travails wiped billions of dollars off regional stock markets and bankers warned about the contagion effect.
Yet many investors had bet on the United Arab Emirates’ oil-rich capital being Dubai’s lender of last resort. Abu Dhabi’s silence exacerbated the uncertainty as the clock ticked down on the deadline for Nakheel, Dubai’s troubled real estate developer, to repay its $3.52bn Islamic bond.
It also placed the relationship between the UAE’s most important and competitive city states under the spotlight.
Yesterday’s news that Abu Dhabi is lending $10bn (€6.8bn, £6.2bn) to help dig Dubai out of its immediate hole will help soothe nerves. But the nature of what many bankers interpret as a last-minute agreement will do little to assuage concerns.
In the end, many observers believe Abu Dhabi felt it had little choice but to act as it witnessed the dramatic fall-out from the decision by Dubai World
‘s parent, to ask for its debt repayments to be delayed.
Now the question on many minds is: what price will Dubai pay for Abu Dhabi’s support? At the very least, experts believe that Abu Dhabi will have oversight on how the $10bn is spent – and the funding is conditional on Dubai World succeeding in negotiating a standstill with its creditors. Some predict wider consequences.
“We believe Abu Dhabi has and will attach political conditions to its financial rescue, including possibly seeking strategic equity stakes in Dubai assets and reining in Dubai’s independence in foreign policy,” says John Sfakianakis, chief economist at BSF-Crédit Agricole Group.
When the UAE central bank subscribed to the first $10bn of a $20bn bond programme issued by Dubai earlier this year, it was seen as thinly veiled intervention from Abu Dhabi. Two Abu Dhabi-controlled banks last month subscribed to a further $5bn. But the capital was apparently kept in the dark about Dubai World’s request for a credit standstill on November 25.
Talks between the two governments and central bank officials began in “earnest” two weeks ago, observers say.
“Lot of loose ends were tied up in the last 48 hours, but the basis of what we have been talking about – the structure and the pieces and the elements – we have been working on for the past two weeks,” says a source close to the Dubai government.
Another source, however, says a senior official with Dubai World was still preparing creditors for the worst on Sunday.
Abu Dhabi has always insisted that it would not allow another member of the UAE to fail. But officials have also made clear there would be no blank cheque and Dubai would have to rein in the excesses that fuelled its problems.
The source close to the Dubai government says: “What I can tell you will happen in the future is: future decisions will be closely co-ordinated with the two governments.”
In response to queries, I’m revisiting an earlier post: “Reports of my debt have been greatly exaggerated,” in which I posted estimates of Dubai World’s real debts after its revelation that it had $59 billion in consolidated liabilities. This terrifying number sparked some to wonder if the treadworn estimates of Dubai Inc.’s $80 billion in debts might actually be higher or that Dubai World’s debts may somehow account for half of the total.
The grand total for Dubai World and its units appears to be $36.49bn, of which $26bn is subject to restructuring.
Strictly speaking, no one knows for sure. Dubai and its subsidiary companies do not publish official debt tallies or debt repayment schedules. But thanks to the diligent work of analysts at EFG-Hermes, Deutsche Bank and Standard & Poor’s, just to name a few, here’s what we know, or at least think we know:
Dubai World has $59.3bn in consolidated liabilities, according to its own statements, which includes all debt and non-debt obligations at the conglomerate, its 12 subsidiaries and the 78 other units they own or control.
Of this, the group owes an estimated $10.52bn in bonds and $13.3bn in loans, for a total of $23.82bn, according to Deutsche Bank.
But clearly this leaves out significant portions of the Group’s overall debts, because Dubai World has announced that the restructuring will affect $26bn in debt, $20bn at Dubai World and Limitless, and $6bn at Nakheel.
Deutsche bank has been able to track down only a portion of these. Dubai World, it estimates, owes $5.5bn in outstanding loans EFG-Hermes has put the loan figure at $6.7bn.
Nakheel owes $5.23bn in bonds and $1.85bn in loans for a total of debt of $7.08bn.
Limitless owes $1.2bn in loans
That only adds up to $13.78bn, leaving $12.22bn in debt unaccounted for.
If we assume that the total debts at Dubai World, Nakheel and Limitless are $26bn and add Deutsche Bank’s estimates for the other Dubai World units, we come up with a total group debt of $36.49bn.
Here’s a schedule of maturies for the Dubai World group debts we know about: Dec. 14: Nakheel’s $3.52bn sukuk is due, though Dubai World has said it plans to ask creditors for a six-month extension. March 31, 2010: Limitless due to repay $1.2bn loan May 13: Nakheel due to pay Dh3.6bn in bonds [May14: if it wins an extension on its 12/14/09 bonds, Nakheel would have its $3.52bn sukuk to repay this day.] June 23: Dubai World due to pay $2.1bn loan Nov. 1: Nakheel due to pay Dh367.35mn loan Jan. 11, 2011: Nakheel due to pay $1.2bn loan Jan. 16, 2011: Nakheel due to pay $750mn bond Feb. 23, 2011: DP World due to pay $6.3bn loan Feb. 23, 2011: DP World due to pay $200mn loan March 22, 2011: Ports Customs and Free Zones due to repay $6.8bn loan (unclear whether this is still a Dubai World liability) April 12, 2011: DP World due to pay $400mn loan April 12, 2011: DP World due to pay $6.8bn loan June 20, 2011: Dubai World due to repay $450mn loan June 24, 2011: Dubai World due to repay $1.95bn loan July 10, 2011: Ports Customs and Free Zones due to repay $1.003bn loan Aug. 10, 2011: Dubai Drydocks due to pay $1.7bn loan Sept. 29, 2011: Ports & Free Zone World due to pay $150.027mn loan Sept. 29, 2011: Ports & Free Zone World due to pay $853mn loan Sept. 30, 2011: Dubai Drydocks due to repay $2.2bn loan Oct. 21, 2011: Dubai Drydocks due to repay $1.7bn loan
DUBAI (Reuters) – Heavy rain pounded Dubai on Sunday adding to the gloom of the emirate’s debt woes a day before the deadline of the $3.52 billion bond by state-owned developer Nakheel, with no word on how it will be handled.
Dubai’s stock market did soar for a second consecutive session on Sunday as traders reacted to a surge in Nakheel’s bond price last week on mounting speculation it will repay.
The Islamic bonds, or sukuk, had been trading around 110 cents to the dollar before the government shocked investors on November 25 with a request for a six-month standstill on the debt of state-linked Dubai World.
The announcement sent the sukuk down to mid-40 lows, but closed on Friday at about 54 cents to the dollar.
Fund managers and bankers regard Monday’s outcome as the litmus test for Dubai World’s planned $26 billion restructuring and Dubai as a whole for resolving its debt burden.
But the odds of Nakheel, the developer of palm-shaped islands, repaying are low.
“It’s very hopeful people (speculating),” says a Dubai-based fund manager. “It seems very strange that if Dubai World intended to pay they would have gone through the last two weeks of pain.”
A sudden u-turn and repayment would placate disappointed and confused investors in the immediate term. Dubai’s handling of the situation has tarnished its reputation.
Dubai’s finance chief on Thursday tried to reassure investors saying its actions were more important than its public image. But, Dubai World has few options.
“The key thing is the lack of clarity,” said Nish Popat, ING’s head of fixed income in the Middle East. “What’s needed more than anything else is some sort of information to understand what the plans are going forward and how they are progressing.”
Reflecting rising repayment hopes, five-year credit default swaps for Dubai fell more than 30 basis points on Friday to 533 basis points, according to CDS monitor CMA DataVision, compared with a peak of almost 700 bps at the end of November.
The level is still high given the CDS was quoted at about 300 bps before the November 25 announcement.
“The CDS spreads are better, and news of a hedge fund buying into Nakheel – this is all positive … even if you buy Nakheel at 50, and they pay out 70, you’re still making good money,” said a banker from a Dubai government-controlled lender.
If Nakheel does not pay on Monday, it would technically be in default, but it would still give its restructuring team a two-week grace period to reach an agreement with creditors.
December 28 is the final cut off point. After that a cross default clause in its original prospectus will be triggered that covers Nakheel and its guarantor Dubai World, adding to the overall debt burden.
Regional markets have been struggling for weeks under the issue.
“Prices are so distorted right now,” said Haissam Arabi chief executive at Gulfmena Alternative Investments. “Tomorrow is a big day, until we get some clarity (about Dubai’s debt) there will be no real trend. The main catalyst we are waiting for is Nakheel news.”
STRIKING A DEAL
Analysts have speculated Nakheel could repay its bond at 70 cents to a dollar and issue new debt for the remainder.
“Such an outcome would be beneficial for both parties involved,” EFG Hermes analyst Fahd Iqbal
Dubai Holding, the conglomerate owned by the emirate’s ruler, received a blow yesterday when Emaar Properties blocked a proposed merger with its real estate arms. Emaar’s decision appeared to be a bid to protect itself from the continuing fallout of Dubai’s debt problems.
DUBAI – Dubai’s finance chief blamed the media on Thursday for spreading “blind panic” about the emirate’s financial problems as it struggles to deal with more than $80 billion of government and corporate debt.
In a speech to the Dubai School of Government, Abdulrahman Al Saleh, director of Dubai’s Department of Finance, said the emirate’s debt problems were a “hiccup-damaging for Dubai’s credibility and lacking broader significance of exaggerated media campaigns.”
Al Saleh accused the international press of creating “blind panic” about Dubai’s economic troubles after it asked bankers to freeze $26 billion worth of debt owed by one of its largest government owned companies, Dubai World.
Dubai’s benchmark stock index has fallen about 30% since the government shocked investors by seeking a standstill on Dubai World’s debt late last month.
“Viele Kreditverträge haben eine Klausel über reziproken Verzug: Wenn ein Gläubiger in einem Fall zahlungsunfähig wird, kann er bei all seinen anderen Kredit-Verpflichtungen ebenfalls in die Zahlungsunfähigkeit abrutschen”, sagte Jawad Ali von der Anwaltskanzlei King & Spalding. Im Klartext: Sollte Nakheel seine Außenstände nicht begleichen, muss die Mutter Dubai World einkalkulieren, dass alle Gläubiger plötzlich ihre Ansprüche geltend machen.
Die Details hingen von der Formulierung des jeweiligen Vertrags ab. “Das ist ein Albtraum-Szenario, das Dubai World mit dem Schulden-Moratorium verhindern möchte”, so Ali.
Dec. 8 (Bloomberg) — Debt restructuring by Dubai state-run companies may almost double to $46.7 billion as more of the emirate’s businesses could need help making payments, Morgan Stanley said.
Dubai Holding LLC, Dubai Holding Commercial Operations Group LLC, Borse Dubai Ltd. and Dubai Sukuk Center Ltd. may join Dubai World in restructuring debt, Morgan Stanley analysts Mohamed W. Jaber and Paolo Batori wrote in a report. Government- controlled Dubai World said last week that it’s in talks to renegotiate $26 billion of loans.
It’s likely that other state companies will “announce debt restructuring plans over the near term,” Jaber and Batori wrote. “We believe that a haircut on the external debt at risk in the area of 40-50 percent is necessary to have a notable long-term favorable impact on public debt dynamics.”
Islamic bonds issued by Nakheel PJSC, Dubai World’s property unit, that mature Dec. 14 fell to 51.5 cents on the dollar from 53 cents yesterday, heading for the lowest closing price on record, according to Citigroup Inc. prices.
original source Bloomberg Dec. 8 , 2009 — Dubai shares tumbled, erasing almost all of this year’s gains, on investor concern that Dubai World is struggling to restructure debt.
Emaar Properties PJSC, the United Arab Emirates’ biggest real-estate developer, slumped 9.8 percent and Emirates NBD PJSC retreated to the lowest since Sept. 3. The DFM General Index plunged 6.1 percent to 1,638.05. The measure, which closed at the lowest since July 13, has tumbled 22 percent since Dubai said on Nov. 25 that it was seeking a “standstill” agreement on Dubai World’s debt.
Headline: Sheikh attacks investors for global fallout of Dubai debt
The ruler of Dubai hit out at international investors yesterday as his government’s impecunious investment vehicle revealed plans to restructure $26bn of its debts.
Sheikh Mohammed al-Maktoum said: “They do not understand anything.”
After days of uncertainty that sent shudders throughout the world’s stock markets, Dubai World finally unveiled plans to address the liabilities of its two property ventures – Nakheel and Limitless – after midnight on Monday night.
The timing of Dubai’s request for a debt standstill, on the eve of the four-day Eid holiday, drew criticism from financial communities across the globe.
But in his first public comments since the crisis broke, Sheikh Mohammed had harsh words for investors and remained bullish about Dubai’s economy. “We are strong and persistent,” he said. “It is the fruit-bearing tree that becomes the target of [stone] throwers.”
Dubai World’s guarantee to bondholders could prove worthless. The emirate’s holding company, which is seeking a six-month standstill from creditors, pledged to repay a $3.5 billion Islamic bond issued by its now troubled property subsidiary Nakheel. Yet with local creditors effectively calling the shots, foreign lenders might find enforcing that guarantee impossible.
Nakheel has asked for trading in all three of its listed Islamic bonds to be suspended. Only the first, which was issued in 2006 and is due to mature December 14, was guaranteed by parent Dubai World. The liability on the subsequent two bonds, which have a total face value of $1.7 billion and mature in 2010 and 2011, appears to be limited to Nakheel itself.
The Dubai property developer’s 2008 accounts show $41.5 billion of assets and $17.5 billion of liabilities — a net asset value of $24 billion. But real estate prices in the emirate have fallen around 50 per cent in 2009.
That means Nakheel, which funded some of the emirate’s most outlandish projects, could easily now have a negative equity value of $5.5 billion.
The equity value at parent Dubai World, which had liabilities of $59 billion at the end of 2008, is also likely to be negative. Its portfolio of 10 companies looks mostly troubled. However, Dubai World does hold 77 per cent of publicly-listed ports operator DP World. That was worth $5.1 billion on November 25, just before Dubai World announced its intention to restructure.
Nakheel’s foreign creditors shouldn’t get excited about their recovery prospects.
To get a lawsuit against Dubai World off the ground, 75 per cent of Nakheel’s bondholders have to agree. But the majority of creditors are local banks, which are likely to accede to any request to roll over Nakheel’s debt — even if the capital structure remains unsustainable, according to one ratings analyst. And even if local lenders joined in, Dubai’s law might not support a claim that forced the sale of the assets of government-related entities.
Lawyers agree the restructuring of Nakheel and its parent will be a test case. That makes Dubai World’s guarantee look less than solid.
The price drop in bonds related to Dubai World’s real-estate subsidiary has posed a question for investors: Does the discounted debt represent an attractive buying opportunity or an ill-advised journey into the uncharted world of debt restructurings of this size in the Persian Gulf?
Bonds of real-estate subsidiary Nakheel dropped in value after the Gulf city-state said last week that it was delaying payment of state-run Dubai World’s debt.
The conglomerate said Tuesday that it was seeking to restructure $26 billion in debt, of which about $6 billion is related to Nakheel, and would ask for a six-month standstill on debt payments.
But with no precedent in the United Arab Emirates for a restructuring of this size, and its government ownership, creditors are in the dark as to how the process may work. As a result, investors will be watching events related to the Nakheel bonds for a road map for future restructurings in the region.
Prices of the roughly $3.5 billion of Islamic bonds, called sukuk, from Nakheel had traded at about 110 cents on the dollar before the Nov. 25 announcement of a delay in Dubai World’s debt payments. Prices had fallen to as low as about 40 cents, but by late Wednesday had rebounded to about 60 cents.
Investors buying the bonds, on which Dubai World is due to pay a principal amount of about 116 cents on the dollar on Dec. 14, are betting that the guarantee and the underlying assets will be worth more than the prices at which the bonds have been trading.
But there remains uncertainty because Dubai World has provided few details about what the restructuring plan would entail.
Moreover, bondholders are unsure of their options if they don’t want to accept the offer.
It isn’t clear that Dubai courts would enforce any rights that holders may have to seize Dubai World’s assets, either land used to secure the Nakheel sukuk or other property the parent company owns, as Western courts might.
Dubai’s legal system is “untested” for a restructuring of this size and international scope, given Dubai World’s overseas assets, said Jawad Ali, a partner at law firm King & Spaulding based in Dubai. “There isn’t a mechanism in place that is laid out clearly,” he said.
Julian Lim, a bond analyst at Nomura Holdings in London, said bond holders are in a weak legal position. As a result, Mr. Lim said bondholders potentially could recoup less than 50 cents on the dollar.
Bondholders representing about a quarter of the nominal value of the $3.5 billion sukuk have formed a group and have appointed London law firm Ashurst LLP to represent them in negotiations.
An added complexity is that bondholders will be in competition with the more than 80 bank creditors of Dubai World.
The banks on Wednesday began formulating a plan for negotiating a restructuring of the conglomerate’s debt to lenders and bond holders. KPMG LLP is expected to be appointed this week to advise the interests of the lenders, said people familiar with the situation.
All creditors must agree to the standstill in order for it to be valid, according to restructuring professionals from two law firms who have seen Dubai World’s sukuk documentation.
If the standstill isn’t agreed to by Dec. 14, when Nakheel’s sukuk is due, Dubai World will technically be in default. If Nakheel defaults, it will be the largest-ever sukuk default in the world and the first sukuk default in the United Arab Emirates.
Dubai’s property market is likely to face further price falls and increased concerns over the availability of finance after the emirate said it would delay debt payment issued by two of its flagship firms, analysts said. … read the full article
Dubai World has refused to offload assets at fire-sale prices to repay obligations, forcing it to seek a debt standstill, a newspaper report on Sunday quoted an unnamed source at the government-controlled firm as saying. read the full article..
The UAE Central Bank has pledged support for lenders in the UAE and made emergency funds available to avert any liquidity shortage that might occur as a result of the proposed restructuring of Dubai World.
Banks in Abu Dhabi and Dubai are expected to disclose their exposure to Dubai World’s estimated US$24.27 billion (Dh89.14bn) bonds and bank debt amid a global search for creditors. read the full story
UAE moves to counter Dubai fallout but markets wary
DUBAI (Reuters) – The United Arab Emirates offered banks emergency support on Sunday, the first steps to ease fears that a looming debt default by two of Dubai’s flagship firms could derail the global economic recovery.
But the move to inject liquidity into Dubai’s banks by the central bank of the Gulf Arab state, together with promises by neighboring city-state Abu Dhabi to provide selective support to Dubai companies was seen as by analysts as the bare minimum.
Dubai markets, which are set to open on Monday morning after a four-day holiday, are expected to fall by the maximum daily limit of 10 percent as banks, property and construction firms face investor ire over moves to restructure the Dubai economy. more…
WallStreetJournal The panic over Dubai`s debt problem tells us more about investors than it does about the emirate. full story……
Video : Gordon Bron says Dubai crisis is a setback
Sheikh Mohammed of Dubai is under mounting pressure to explain the emirate’s debt problems, after Abu Dhabi indicated that it will not write a blank cheque to bail out its neighbour. read more
Wall Street Journal 29.November 2009 DUBAI (Zawya Dow Jones)–Debt-laden Dubai World’s unit Jebel Ali Free Zone Authority, or Jafza, faces on Monday a coupon payment on a 7.5 billion U.A.E dirham ($2.04 billion) Islamic bond in the first key test of whether it will default.
The Islamic bond, or sukuk, was issued in November 2007 through a Cayman Islands-registered company called JAFZ Sukuk Limited and pays 130 basis points over the six-month Emirates Interbank Offered Rate, according to Zawya.com.
The coming coupon payment is estimated to be between AED125 million and AED135 million, according to analyst calculations.
Spokespersons for Dubai World declined to comment on the payment Saturday, a holiday in the U.A.E. The Jafza sukuk is the first payment due for a Dubai government-related entity since the restructuring announcement Wednesday, which sent global markets and banks into a panic before the weekend.
Dubai World’s request for a standstill will include a key $3.52 billion bond owned by Nakheel, the developer behind Dubai’s palm-shaped islands, that matures on Dec. 14.
Payments on the sukuk are made semi-annually, on May 27 and Nov. 27. Bankers said that payment is due on Monday, since Nov. 27 fell on a weekend in the U.A.E.
Barclays Capital, Deutsche Bank, Dubai Islamic Bank, and Lehman Brothers acted as joint lead managers and joint bookrunners, according to the bond prospectus. The sukuk is due November 2012.
Jafza operates a free trade zone and industrial parks in the port town of Jebel Ali, outside of the city of Dubai, and is a unit of Economic Zones World, or EZW. EZW is operated by Dubai World.
S&P and Moody’s downgraded Jafza and other Dubai government related-entities Wednesday, after Dubai World said it would restructure and ask for a standstill on all debts until at least May 2010. S&P placed Jafza on creditwatch with negative implications. Moody’s downgraded its issuer and debt ratings to Ba1 from Baa1.
South Korea’s financial authorities were to convene a meeting later on Sunday to gauge the fallout from the Dubai debt crisis and discuss countermeasures to stave off any possible impact on the nation’s financial markets, officials said…… read more
…..Dubai is in trouble. We already knew that, long before the announcement last week that it wanted to delay payments on billions of dollars of debts owed by its Dubai World (DW) state holding company. But the trouble caused by a collapse in the property market put the city on a par with other states around the globe. This announcement was of a different order. It damaged the credibility of the city’s government and, by extension, the United Arab Emirates (UAE) as a whole. …. read more
If Abu Dhabi doesn’t mount a serious rescue operation, creditors are likely to seek legal redress against the defaulting Dubai government.
Dubai’s heavily foreign investment-dependent economy began to unravel in September 2008 following the global credit crunch. Property prices fell steeply, share prices in publicly listed companies collapsed and confidence was badly shaken in the emirate’s ability to survive the crunch. By the close of 2008, government-backed companies responsible for Dubai’s development had accrued debts of more than 80 billion dollars.
Abu Dhabi bailout. In February this year, following Dubai’s difficulty in refinancing a $3.8 billion loan, the United Arab Emirates (UAE) Central Bank, backed by Abu Dhabi, subscribed to a $10 billion bond, with interest rates set at 4%. However, earlier this month, it became apparent that Dubai would need a much bigger capital injection, especially given that its largest property developer–Nakheel, a subsidiary of Dubai World–was due to refinance a $3.5 billion Islamic sukuk bond on December 14.
Article Controls On November 24, it was announced that Abu Dhabi had provided an additional $5 billion loan:
–Significantly, insiders indicated that this loan came with strings attached, and that it was to be used to pay disgruntled foreign contractors rather than to re-finance the Nakheel debt.
–While little is known about Abu Dhabi’s reasons for these limits on its assistance, it may have been reluctant to be associated with Nakheel, a company with problems considered to be too big to solve through loans.
Sovereign default ?
Although not technically an example of a sovereign default, the request has been viewed as such. The agencies have thus downgraded most government-backed Dubai companies and entities either to below investment grade or to junk status.
The credit default swap rate on Dubai debts rose by more than 100 basis points, taking it to 434 points. As a result, the emirate’s ability to seek additional credit on international markets has been sharply curtailed.
Political collapse ?
If Abu Dhabi does not mount a serious rescue operation, creditors are likely to seek legal redress against the defaulting Dubai government:
–In this scenario, ‘Dubai Inc.’ will be widely regarded as bankrupt and the ruling Al-Maktoum family held responsible, due to the ‘blurred lines’ between the government and the wealth of the ruling family.
–There would also be political ramifications. It would be unfeasible for Sheikh Mohammed or Sheikh Hamdan to remain in power following such a massive loss of prestige.
If, on the other hand, Abu Dhabi does agree to provide more credit, there will also be significant implications:
–It will do so only under very strict conditions, since it will be reluctant to pour money into rescuing failed projects. –It will thus begin to dictate terms to Dubai, and almost certainly seek to centralize power in the UAE federation and rein in Dubai’s autonomy. –However, given the political culture of the Gulf states, such moves are likely to be made discretely, in order to allow the Dubai ruling family to save some face.
Outlook. Dubai World’s decision to delay paying its creditors is a serious miscalculation, since, by trying to restructure some of its largest debts, it has placed itself under close international scrutiny. This will make it extremely difficult for the company to acquire fresh credit, and increase the risks of further defaults. Only oil-rich Abu Dhabi is in a position to stage a financial rescue, but even if it does, Dubai is likely to emerge chastened, and to adopt a different approach towards economic development.
To read an extended version of this article, log on to Oxford Analytica’s Web site. Oxford Analytica is an independent strategic-consulting firm drawing on a network of more than 1,000 scholar experts at Oxford and other leading universities and research institutions around the world. For more information, please visit Oxford Analytica here
original source The National Japanese builders are owed billions of dollars on projects that include the Dubai Metro and Palm Island, according to a top diplomat and leading contractors from the country, Japanese builders have played a pivotal role in Dubai’s construction boom, spearheading work on the Dh28 billion (US$7.6bn) Metro and helping to build Nakheel’s palm-shaped islands off the emirate’s coast.
But as the global financial crisis brought many projects to a standstill, an increasing number of foreign companies, especially builders, have reported payment problems mainly linked to Dubai developers.
“Some Japanese construction companies are facing very serious debt problems as Dubai can’t pay,” said Seiichi Otsuka, the Japanese consul general in Dubai. “Some companies engaged with the construction of the Metro are facing some payment issues.” He said companies were also owed money by Nakheel. read the rest of this article…The National
original source online WallStreetJournal by Maria Abi-Habib and Stefania Bianchi Dubai will crank up efforts this week to tackle its $80 billion debt pile with senior officials heading to Asia to meet potential investors amid reports that one of its most indebted companies has repaid a $1.2 billion bond ahead of schedule.
Top officials from Dubai’s Department of Finance will meet fixed income and Islamic investors in Hong Kong, Singapore, London, Dubai and Frankfurt starting Thursday ahead of possibly selling more debt this year, according an invitation sent to bankers and seen by Zawya Dow Jones Monday.
An external spokesman for the department said the roadshows are part of “ongoing investor communication” but bankers suspect the meetings could be an early sign that Dubai may be preparing to issue the second half of its $20 billion bond program launched in February to support its economy and embattled companies.
“This will be the first time investors hear the Dubai story from officials post-crisis,” Abdul Kadir Hussain, chief executive of Mashreq Capital told Zawya Dow Jones. “How this story is received will determine how successful Dubai will be over the next three to five years.”
At the height of the global financial crisis, the Abu Dhabi-based central bank of the United Arab Emirates supported Dubai by underwriting the first half of its planned $20 billion bond program to bail out the sheikdom’s struggling companies and economy.
Recently, Dubai officials including Omar bin Sulaiman, the head of the Dubai International Financial Center, have said they expect strong interest from private investors for the eagerly awaited second $10 billion bond.
Mohamed Alabbar, who helps oversee a committee evaluating the impact of the global credit crisis on Dubai, told CNN earlier this month that the emirate may raise the additional $10 billion by November.
The investor meetings due to start in Hong Kong on Oct. 22 are the latest sign that Dubai and its government-owned companies are trying to dig themselves out of an estimated $80 billion debt pile, most of which was incurred during the emirate’s property, tourism and logistics boom.
According to Standard & Poors, Dubai has almost $5 billion worth of debt maturing between September and the end of the year. The biggest share of this debt is held by Nakheel, a unit of government-owned Dubai World. The company has a $3.5 billion Islamic bond maturing December. The bond, which will be pumped into Dubai’s Financial Support Fund, is seen as a critical test of Dubai’s credit worthiness.
“The Financial Support Fund is in need of further resources to fulfill its mandate of supporting Dubai’s government related entities, many of which face heavy debt repayments in the coming three years,” said Farouk Soussa, head of Middle East government ratings at S&P.
PAYING DEBTS
A report Monday in Middle East Economic Digest said Nakheel had repaid a 4.4 billion U.A.E. dirham ($1.2 billion) securitized bond issued in January, one month ahead of the scheduled repayment deadline of Nov. 15. The repayment made on Oct. 15 will come as a comfort to many investors in Nakheel, and especially those concerned about Nakheel’s December sukuk. A Nakheel spokesperson declined to comment when contacted by Zawya Dow Jones Monday. Nakheel’s bond repayment came on the same day that government-owned conglomerate Dubai World announced that it completed a major restructuring.
The move will help the firm save $800 million over the next three years and ease a small part of the near $60 billion of liabilities on its books. The term liability refers to a company’s legal debts or obligations arising from its business operations.
Earlier this month, Dubai Holding, a conglomerate controlled by the emirate’s ruler, paid back in full a $300 million loan belonging to its Sama property unit. There are also signs that Dubai is repaying some of its outstanding bills to construction contractors.
On Monday, U.K. Trade Minister Mervyn Davies said that debts owed to British contractors in Dubai have reduced, but payments remain outstanding.
“I think it has improved, but it’s been a sensitive issue, and it is important that Dubai companies pay their debts,” he said.
The U.K.-based Association for Consultancy and Engineering, which represents about 800 British construction firms, said in May it was tracking approximately GBP400 million in unpaid fees for building in the emirate.
(Natasha Brereton in London contributed to this story.)
Angry residents of Dubai’s Discovery Gardens are set to take their row to the Ruler’s Court this week in a bid to force developer Nakheel into slashing “exorbitant” service charge fees.
More than 90 tenants and homeowners have signed a petition, set to be presented to the Ruler’s Court and Dubai’s Real Estate Regulatory Authority (RERA) later this week, which asks the government to force Nakheel back to the negotiating table to review the charges, which cover building maintenance, community and cooling fees.
Residents are due to pay the first installment of next year’s fees on October 1.
“We want the government to freeze our payments to Nakheel and to force Nakheel to justify its charges in light of the substantial drop in costs we’ve seen since last year,” said Michael Aldendorff, the head of an unofficial resident’s association. Read the rest of this entry »
A letter presented to the Dubai Court of Appeal yesterday established that developer Nakheel is a public joint stock company (PJSC), not a private one.
The letter was produced by a lawyer representing Nakheel in the case of two former employees who are appealing against their convictions for bribery.
The defendants’ lawyer, Saeed Al Gelani, had said in an earlier session that a ruling by Court of First Instance that Nakheel was a public shareholding company was not true to facts.
He referred to an article by Nakheel’s legal advisor, David Nicholson, that appeared in Arroaya magazine, which is published by the developer. The article said Nakheel had become a private company and was published before the defendants were sent for trial. As a result, said Al Gelani, the two had been tried wrongly.
The accused are 32-year-old UAE national WA, a former general manager of sales at Nakheel, and Egyptian KN, 28, who was a sales representative at Nakheel. Prosecutors say they allegedly asked for a bribe of Dh5.1 million from a real estate brokerage firm to help it buy a plot owned by Nakheel.
Dubai Criminal Court jailed the defendants for three years and ordered them to pay Dh3m. The court is considering a third appeal by Public Prosecution.
DUBAI // Rashmey Seth paid Dh3.2 million for two luxury flats, furnished them and rented them out. That was nearly two years ago – but she is still not sure she actually owns the properties.
Receipts from Nakheel confirm that she paid the state-backed developer in full for a three-bedroom flat on the Palm Jumeirah. Mrs Seth has similar paperwork for a one-bedroom unit in downtown Burj Dubai, purchased last year from Emaar, the Middle East’s largest developer.
What she has not received from either of the property giants are title deeds – the crucial documents that verify ownership.
It is a predicament shared by many, their status as lawful owners in limbo because of the absence of a piece of paper that, after properties are registered with the Dubai Land Department, should be handed to buyers.
The issue, says Mrs Seth, makes her wonder whether she has a legal right to sell her flats.
She is by no means the only property owner in Dubai worried about not having deeds to the flats she has paid for. Without deeds, it is unclear what would happen if the company they bought their property from went bankrupt.
There could also be problems with selling the property on: potential buyers could find it difficult to get a mortgage without formal proof of ownership.
In Mrs Seth’s case, her dilemma has shaken her confidence in Dubai’s freehold property laws, introduced three years ago to give foreigners the right of ownership. “Why am I not getting the comfort that there’s a legal structure to support me, that makes me feel sure that I really own my property?” said Mrs Seth, 52, an Indian who has lived and worked in Dubai for 28 years.
Her fears are not unfounded. Law Number 7 of 2006 states that until flats are registered with the Land Department, which will then grant title deeds, buyers lack the rights of fully fledged owners.
In an email statement, Emaar did not specify how many of its property holders had not had units registered or lacked deeds.
Nakheel said the “majority of … purchasers who have taken handover have received their title deeds”.
Given the size of Nakheel’s development portfolio, that could still mean thousands have not received them.
There are indications that a substantial number of buyers across Dubai lack deeds. After posting a query on Crest of Dubai, a website used by residents of the Palm Jumeirah, The National received nearly two dozen complaints.
And Michael Aldendorff, a 39-year-old South African who is one of the leaders of an informal homeowners’ group in the Discovery Gardens development, reckoned that most buyers in the 26,000-apartment community lacked deeds.
“I don’t think that many people here have them at all,” he said.
That, however, has not stopped developers from asking purchasers to pay to get their deeds. Mrs Seth said she was asked to hand over about Dh55,000 for flat-registration fees to Emaar and Nakheel. She said she had little choice but to comply; according to Land Department regulations, a buyer cannot register a property without the developer’s consent.
“They take these undated cheques from you, and they bank it at their will, so what can you do about it?” she said of Emaar and Nakheel.
“If there is a delay or something from the Land Department in getting the registration, or the documentation is not ready from the developer’s side, then why are they taking my money?”
Sabri Pozem, who owns a one-bedroom flat in Discovery Gardens, in which he has a tenant, wonders whether the authorities – or anyone apart from himself – have records of his purchase.
Mr Pozem, a 29-year-old from Turkey, is one of the owners in the development who complain about disorganisation among Tamweel, the mortgage lender, Nakheel, the master developer, and property companies which, after purchasing Discovery Gardens apartment buildings from Nakheel, have sold them as flats to individual buyers.
He said a salesperson with the company he bought his flat from entered the property last month and began showing it off to a prospective buyer. His tenant had just come out the shower and was wearing only a towel when she encountered the surprise visitors.
“The problem is, they are so disorganised they don’t even know who bought which apartment in the building,” said Mr Pozem, who said he had tried many times to obtain his deed and has had no success.
He fears that if he wanted to sell his flat, the records would show it was still owned by the property firm. “If they go bankrupt tomorrow, I’m basically out of luck; all my money’s gone because I don’t have a title deed.”
Mr Pozem is not the only owner worried that without deeds they might not be able to sell their units.
Anne, 37, a British national, bought two one-bedroom flats in the Dubai Marina’s Marina Promenade in August last year and two more in Green Lakes Towers in Jumeirah Lake Towers. Despite investing nearly Dh4m, she does not have a deed for any of them.
Anne, who asked that only her middle name be published, said her main concern was that banks would refuse a mortgage to prospective purchasers without a deed, an increasingly common requirement after the credit crunch.
She also said Emaar, the developer of Marina Promenade, and Asam Investment & Real Estate, the Green Lakes Towers developer, had been little help.
“I’ve been given exactly the same reasoning: ‘there’s a queue at the Land Department; expect to hear from us in September’.”
A senior administrator at Asam Investment & Real Estate, who gave his name only as Abraham, told The National that a backlog at the Land Department was responsible for the delay.
In Green Lakes Towers, he said, about 700 units in the three towers were still waiting to be registered.
“We cannot do them individually; we have to register the whole tower together,” he said. He added that he hoped the process could be completed within a month. Humaid al Shamsi, the head of the transactions section at the Land Department, acknowledged the issue.
Eighty per cent of the buildings on the Palm Jumeirah have been registered, he said, but he did not have details of how many flats had been registered or title deeds granted.
At Jumeirah Lake Towers, he said, “the process has been started now.” He attributed any delay to “extra measurements” being done to the buildings.
Emaar declined to give reasons for delays in handing over deeds, but said in an email that it “works closely with the Dubai Land Department to assist its customers during the process, including having a representative from the Land Department available for assistance at the Emaar Property Handover office.”
However, Karim Nassif, a property lawyer at Habib al Mulla & Co, said the slowdown in the property market meant a logjam at the Land Department was an unlikely cause for the problem.
In most cases of undelivered title deeds, he said, “the developer should be held liable – 100 per cent – for it. They should be delivering their title deeds”.
And he had a warning for the worried owners: “If they don’t have the title deed, their transaction, according to the law, is voidable.”
Master developer Nakheel on Monday hit back at claims made by Dubai property group ACI Real Estate – and insisted its Waterfront mega-project was going ahead.
Robin Lohmann, managing director of ACI Real Estate, in an interview with Arabian Business this week, blamed the state-owned developer for a lack of progress on his flagship Ferretti Luxury Beach Residence and Pershing Luxury Beach Residence projects, located in the Madinat Al Arab area of the Nakheel’s Waterfront development in Jebel Ali.
“We have invested in several plots in Dubai Waterfront. We need to know from the master developer of Waterfront, which is Nakheel, if they plan to go ahead with the project now or not. Once we have these answers we can give to answers our purchasers,” Lohmann said.
But in an emailed statement to Arabian Business Nakheel said it had handed over ACI’s two plots and the company was free to start construction.
“The two plots which ACI own at Madinat Al Arab have already been handed over,” a spokesman for Nakheel said.
“Waterfront has not been cancelled. Our current focus at Waterfront is on Badrah, Veneto, and Madinat Al Arab. Work continues to make good progress at these sites,” the spokesman added.
The Madinat Al Arab phase of the Waterfront is due for completion in 2015. Other sub-developers such as Plus Properties have started construction at Madinat on its Pixel Tower and Wave Residence projects.
“At Madinat Al Arab, we remain committed to providing infrastructure to third party developers as per their Sales and Purchase Agreements. The majority of plots in this phase have been handed over with some third party developers already mobilised on-site,” the Nakheel spokesman added.
Dubai-based property developer and investment company ACI Real Estate, is a division ACI (Alternative Capital Invest) Group, a German firm with interests in asset management and real estate.
The Waterfront is a planned seaside mega project, twice the size of Hong Kong. It is being built over six phases and completion dates range from 2010 to 2018.
Nakheel said in December the Madinat Al Arab, Veneto, Badra and Canal District phases of the Waterfront were pressing ahead, while other sections would be delayed in the wake of the global crisis.
Alternative Capital Invest (ACI) Real Estate, the troubled German-owned developer behind projects such as the Boris Becker, Michael Schumacher and Niki Lauda towers, says it will put on hold its developments on the Dubai Waterfront and shift investor holdings to other assets.
Affected projects include the Ferretti and Pershing towers, which have yet to begin construction. The company said it would shift client’s investments in these developments to its towers in Business Bay, which consist mainly of the towers linked to prominent German sport figures. The Becker, Schumacher and Lauda towers are currently under construction but running significantly behind schedule.
In recent weeks a group of German investors in ACI-linked funds, which have financed the developments, complained that the developers have missed payout deadlines. The postponement of the Dubai Waterfront towers comes as ACI is struggling to maintain investor funding that it needs to complete existing projects.
Robin Lohmann, the managing director of ACI Dubai, said in a recent interview slowing payment was having an impact on construction schedules.
“All our sites [in Business Bay] are under construction,” he said. “But since there are delays in people’s payments, we have had to slow down in order to deal with it. If nobody pays, the risk is that construction stops. This is the last thing that we want.”
He added that of the 11 projects the company had underway, at least seven were under construction.
DUBAI // Rama Hariharan wonders if her six-bedroom, Dh5 million (US$1.36m) dream home has begun succumbing to Mother Nature.
Sections of her villa, adorned with custom-made furniture from Indonesia, leak profusely when it rains, leaving behind permanent water stains. The walls in the stairwell leading to the second floor are crisscrossed with small cracks. So too is the building’s sun-baked facade.
“It’s a lovely place,” says Mrs Hariharan, 50, from India, as she gives a tour of her home in The Lakes. “But the construction quality, well, we’re a bit disappointed.”
Mrs Hariharan suspects that her three-year-old freehold villa may be prematurely ageing. She is not alone.
From The Greens and The Springs to The Lakes, homes in some of Dubai’s neighbourhoods built in the early stages of the construction boom have crumbling facades, peeling paint and sagging roofs.
As the nicks and cracks grow, residents’ concerns that their expenses will shoot up after their warranties – usually 10 years for a villa – expire are also on the rise.
Some blame poor craftsmanship, a consequence of rapidly building thousands of villas and apartments during a short time. Others point to poor maintenance standards. Mother Nature has also played a part, the extreme heat taking years off the lives of buildings, construction experts say. Most, however, agree the phenomenon is an eyesore.
“We’re not going to be living here forever, but you want a place that’s a better quality of living,” says Ahmed Ibrahim, 38, an Egyptian who lives with his family in a two-bedroom apartment in The Greens. The neglect “gives you the feeling that the area could be substandard, lower quality”.
He says his family enjoys the community-oriented design of The Greens, notably its swimming pools and barbecue pits.
But the ceiling in his apartment is crumbling away, and the development’s common areas are dotted with sheets of peeling paint. From the outside of the complex, entrances and tan-stuccoed walls appear to be in need of some tender loving care.
The culprit, Mr Ibrahim suspects, is neglect.
“To be fair, the community here, the facilities, they’re OK,” he says. “But from 2005 to today is just four years – that’s a short time to be experiencing these problems. When it comes to maintenance, to the quality of the buildings, there is room for improvement.”
In an e-mailed statement, Emaar, the master developer of these residential complexes, said its properties were “delivered to the strictest quality standards with appropriate warranties in place”.
Residents with maintenance issues can call Emaar’s hotline (800-EMAAR). “The normal signs of wear and tear in buildings,” the statement said, “are easily remedied via the planned preventive maintenance programmes and other remedial measures that are conducted on an annual basis based on the urgency of the requirement.”
But some residents, such as Nagham Hiraki, who with her husband rents a villa in The Springs 15, fear serious structural problems could cause certain parts of home to collapse.
“The place isn’t sound,” says Mrs Hiraki, 47, a Syrian national who says she has had difficulty getting her landlord and property management companies to address problems in the three-bedroom home. “For a while, I was afraid that the garage was going to fall.”
She estimates that she and her husband have paid Dh7,000 for repairs since they moved into their villa three years ago. That sum does not include a large crack that has gradually bisected her living room, or those that run along her stairwell.
The problems have convinced her to move, possibly to the Jumeirah Beach Residence apartment towers at Dubai Marina. “I wouldn’t want to live in this villa even if the rent was Dh10,000 a year,” she says.
In nearby areas, for example The Springs Four, residents also complain about a broad range of issues, including sinking driveways, sagging garages and shoddy plumbing.
In most cases, the structural integrity of villas and apartments in these residential areas is sound, says Martin Seaward-Case, a chartered surveyor who has observed construction in Dubai for the better part of a decade.
If there are issues, he says, they will probably be localised to certain sections of these communities. Because construction was delegated to hundreds of subcontractors with varying experience, it is possible that clusters of villas could have inferior build quality.
Between 150 and 300 subcontractor companies were involved in the building of these areas, he says, “so you’ll have sections that were just built better.” The Springs contains about 4,700 homes, according to the property research firm Landmark Advisory.
If anything, Mr Seaward-Case says, the “tenacious climate is more responsible than the actual build quality” for such issues as chipping paint and leaky roofs. Compared with structures in Europe, Dubai’s harsh weather probably reduces a typical villa’s life expectancy by a decade or more.
“Flat roofs are notoriously difficult to get right in this part of the world,” he says. “It only rains for two days a year, so for the other 363 days of the year it has got to deal with this incredible thermal shock that happens to it during the day.”
According to some property-management firms, the country’s unusually warm climate makes diligent upkeep all the more important.
But this is often neglected, Mick Dalton, general manager of Abu Dhabi-based Marafeq Facilities Management, says. “With the harsh environment here, it needs to be done on a regular basis.”
According to Adrian Quinn, chairman of Essential Community Management, unless the practice of property management in the UAE changes, it will be difficult to perform the necessary upkeep at residential areas.
In his native Australia, management typically repairs nicks and scratches within 24 hours, he says.
“The general philosophy here is that it sits there from month to month to month, until somebody says, ‘Oh, we’re going to repaint the building in another year, so let’s just wait and do it then’. And slowly the building degrades because they don’t have the budget to keep it looking new.”
Not until residents can form homeowners’ associations and vote on maintenance budgets and the awarding of maintenance contracts will the necessary incentives for proper property upkeep take hold, Mr Quinn says. Formal associations would grant them the authority to hire property management companies and collectively pool money to pay for expensive paint jobs and general property care. This would help relieve individuals of financial burdens, especially when home warranties expire.
“At the end of the day, for property, you must put money away for future maintenance,” he says, “because the owner will get hit with the cost of major capital works of repainting the building, caulking, waterproofing, etc.”
Comments:
“It is a disgrace that these developers use the excuse of the weather, to cover their inadequacies . We all know what the weather is like here, they knew before they built the properties, therefore they should build to a standard that can withstand the heat that the UAE gets. this is the norm all around the world, property is built to suit local weather conditions.
also the excuse of “hundreds of subcontractors were involved” is just not a real excuse they were the master developer, they are responsible for who they use as subcontractors therefore the master developers should stand up and accept their responsibilities instead of blaming others.
as for Mrs Hiraki, to move from a Crumbling Villa to a Crumbling Tower will not solve anything for you. JBR is another example of poor design/construction and greed..”
“Can’t have said it better myself. After having lived in this country for over 15 years, I’ve absolutely no desire to buy property knowing what the substandard quality (or complete absence thereof) of preventative maintenance is like.”
Dubai-based property developer Nakheel is offering consultants and contractors only 65 percent of what they are due, the New Civil Engineer reports.
“One of the offers on the table is for firms to get 65 percent of their consultancy fees, with the understanding that in doing so, they waive their legal rights [to further payment],” said Nelson Ogunshakin, CEO Association for Consultancy and Engineering.
Nakheel received an undisclosed cash injection from the Dubai government in early May, as part of Dubai’s $20 billion bailout plan.
According to the publication, Nakheel refused to comment on the issue.
ABU DHABI // Nakheel made headlines around the world with its Palm island projects and the planned Hong Kong-sized Waterfront development, while its advertising billboards dotted around Dubai asked “What next?”
What next is the question now being asked by investors as one of the Middle East’s largest property developers contends with a US$3.5 billion (Dh12.85bn) Islamic bond due in December, which helped fund projects that included the world’s biggest man-made islands.
How the sukuk is handled will serve as a key test for the credit ratings of state-controlled companies in the emirate and could affect their ability to raise money on international markets. It is also widely seen as an indicator of how Dubai will cope with its overall debt burden, estimated at $70bn.
“The clock is ticking, so something has to be done,” says Abdul Hussain, the chief executive of Mashreq Capital.
Nakheel issued the three-year sukuk in 2006, when the Dubai property market was still in a fever and the likelihood of a downturn seemed impossibly remote. The bond came with a profit rate – the Sharia-compliant equivalent of an interest rate – of 6.345 per cent per year. To ease its cash flow, however, Nakheel arranged to pay just half of that, or 3.1725 per cent, during the life of the bond. It would pay the rest at maturity, which seemed a sensible strategy given the rapid rise in property prices in Dubai and the healthy profits the company was booking.
As a further teaser, Nakheel added an option for sukuk holders to buy shares of Nakheel at a 5 per cent discount should it stage an initial public offering and become a listed company. It also backed up the sukuk with significant collateral: land and other assets worth more than twice the value of the sukuk.
At first, international investors eagerly snapped up the offering. Initially, just 30 per cent of the shares were sold to investors in the region, according to a source involved in the deal. The rest went to overseas investors.
Almost three years later, the economic climate could hardly be more different and Nakheel, like many other companies in Dubai, is busy working out how to settle its debts amicably while continuing to build and invest. The company recently undertook a round of cost-cutting and is said to be asking its contractors to take discounts on payments due to them. A source at a building contractor in Dubai that has worked on a number of Nakheel projects said all construction companies associated with the company’s Waterfont development had been asked to take discounts ranging between 30 and 40 per cent.
Yet among the many ways in which Nakheel must cope with the changing economic tides, its $3.5bn sukuk probably ranks as the most significant – and most urgent. The uncertainty surrounding the sukuk has caused its price to rise and tumble rapidly. It was recently trading at a heavy discount, with a yield of about 58 per cent. Low prices and high yields mean investors demand to be compensated with a high return for taking an increased risk that their money may not be paid back in full. “The market obviously believes there is a significant risk of some form of restructuring,” Mr Hussain says. “Otherwise you wouldn’t be able to earn a 50 per cent yield. We are now waiting to hear what sorts of strategies are going to be put in place.”
Nakheel has a range of options for the sukuk, analysts say. It may simply pay off investors in full using an injection of funds from the Dubai Government, received as part of the first instalment in a planned $20bn bond programme. Nakheel said recently it was receiving assistance under the programme.
It could also sell part of itself to a private equity firm in order to raise some of the cash. Analysts have suggested that money raised from a possible sale of part of DP World to a private equity firm could be redirected through Dubai World – which owns both DP World and Nakheel – to help pay off the sukuk. Abraaj Capital, a buyout firm managing $6bn in assets, has approached Dubai World about acquiring a “significant minority stake” in DP World, a source with knowledge of the discussions said earlier this week.
Nakheel could also go to banks for loans to refinance part of the sukuk, or it could try to buy back a chunk of the Islamic bond by extending a tender offer to existing owners.
Another option is for Nakheel to partially restructure the sukuk, giving most of investors’ money back and converting the rest of the debt into a new longer-term loan. This route could also involve one or both of Nakheel’s other sukuk, which are smaller and due in 2010 and 2011.
Rumours of such a restructuring began to surface about a month ago, when Nakheel hired a market intelligence firm to identify the owners of its sukuk shares. Many investors saw this as an indication that the company was trying to find out what portion of the sukuk was owned by investors who would be sympathetic to an attempt to restructure.
The possibility of a restructuring led Standard & Poor’s, a major ratings agency, to put numerous Dubai companies on watch for a credit downgrade.
A Nakheel spokeswoman said in a statement that “a number of options” were currently on the table and declined to elaborate. Bankers said that a restructuring that left investors with a loss was probably Nakheel’s least desirable option, aside from a fully fledged default. If Nakheel were to allow many of its investors to take losses, they said, the cost of raising money in the future – for Nakheel and other government-linked companies in the UAE and the broader GCC – might go up.
“Nakheel has a large volume of public debt, much of it held by international investors, so a lot is at stake regarding international credibility of Dubai corporates that will likely at some point seek to borrow again in the global capital markets,” says Khalid Howladar, a vice president and senior credit officer for structured and Islamic finance at Moody’s, another ratings agency.
What seems most likely, investors and observers say, is a combination of some of these options. Nakheel may buy back some of the sukuk shares using subsidy money, for example, offering an above-market price for them. If some investors are unwilling to sell, the company could then try to refinance a portion of the debt with bank loans and sell some of its equity to a private equity firm.
Bobby Sarkar, an analyst at Al Mal Capital in Dubai, believes Nakheel is also considering selling some of its assets, such as its stake in the Atlantis Hotel on the Palm Jumeirah and properties in Discovery Gardens, both in Dubai. “They are looking at a combination of asset sales, some inflow from the Government, some restructuring and a partial sale to Abraaj.”
Whatever options it chooses, a source familiar with the sukuk says, a full default or even a serious restructuring is highly unlikely, given the value of the collateral that Nakheel has provided and the negative message such a move would send to international markets.
Moreover, Dubai’s government-linked companies have so far succeeded in paying off or refinancing large loans and bonds as they come due. In February, for example, Borse Dubai – the company that owns Nasdaq Dubai and the Dubai Financial Market – was able to refinance a $3.4bn bank loan, albeit with major help from local sources of funding.
Last month, the Dubai Electricity and Water Authority refinanced a $2.2bn Islamic loan with 18 international, regional and local banks.
Nasser al Shaikh, the director general of the Dubai Department of Finance, said a week later there was a “shift in the overall mood” in the international credit markets when it came to Dubai’s debt.
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Nakheel has started receiving funds from Dubai Government, confirmed its Chief Executive Officer (CEO) Chris O’Donnell in an exclusive interview with Emirates Business. However when asked if the figure stood at Dh2 billion, the chief executive said: “The actual figure is confidential and so are all the other details. But yes, Nakheel is receiving funds.”
The developer is also talking to its contractors and re-negotiating payments plans and contracts. “Yes, we are trying to help them and ourselves through our current situation. We are at the stage of commercial settlements and negotiations. Rather than detail on percentages, it is a true statement to say that construction costs are falling and there is definitely a reduction,” said O’Donnell.
“Part of our obligation to our customers is to ensure that we get them the best buildings. Hence, we are talking to our contractors to get cost-effective solutions.”
O’Donnell said the developer does not issue credit notes and warned investors against any such fraud. “When the market recovers, the focus will be on people buying serviced land. Hence, the built form in Nakheel’s projects is definitely going to be linked to the provisions of infrastructure, which will be on an incremental basis,” he added. Speaking about the latest on the status of Nakheel projects, O’Donnel said that work on Palm Jebel Ali has slowed down while the Palm Deira and the Universe projects are on hold.
However, construction on Jumeirah Village and Al Furjan is progressing, he said.
House prices on Nakheel’s Palm Jumeirah project have fallen below AED800 per square foot for the first time in over three years – and nearly 60 percent down in the past five months, Arabian Business can reveal.
Agents are now looking to offload three bedroom apartments covering 2,184 square foot for just AED1.7 million, representing only AED778 per square foot.
And experts suggest even that figure could fall further.
“The 1.7m (dirham) is the listed price, and we all know that nobody is selling for a listed price. There are people who may be willing to take even 1.5million, which would less than 700dhs per square foot,” said one agent.
Other experts suggest that the continued falls are linked to the exchange rate between the pound and dirham.
“With the rate have fallen to around five dirhams to the pound, landlords based in the UK can afford to take nearly 30% less than they were asking based on last year’s rate and still end up with the same amount of sterling in their bank. That factor is definitely pushing the market down more,” said the agent.
The decline in sale prices comes as a new rental index for Dubai to be published this week will show a 30 percent fall in rents since March for Palm Jumeirah villas.
The Landmark Advisory index is expected to show declines in other residential hotspots in Dubai such as apartments in Jumeirah Beach Residence (JBR) and townhouses in the Springs – with rental falls of eight percent compared to Landmark’s last index.
“Since our last price map published at the end of March, we’ve seen a shift towards leasing. Owners are unable to sell their units and they are unwilling to lower their prices. They are adjusting their investment horizons and turning to leasing to generate revenue,” said Jesse Downs, director of research at Landmark Advisory, the consultancy division of Landmark Properties.
According to a media report, the property developer owes UK engineering firms more than $290 million. Nakheel has declined to comment.
A report in the UK-based magazine New Civil Engineer quotes analysts as saying that real estate developer Nakheel has not paid debts amounting to more than $290 million. The money is owed to engineering companies in the UK such as Atkins, Mouchel, Scott Wilson and WSP.
Nakheel has declined to comment, saying only that it “doesn’t disclose confidential information about supplier contracts.”
Earlier this month, Atkins revealed that delays in payment for its Middle-Eastern projects had forced the company to use around $36 million of its own cash to keep operations running over the past three months. “We expect that cash collection will remain challenging for at least the next few months,” the company said.
According to the report in New Civil Engineer, WSP also released a statement recently, stating that it was making “appropriate and prudent provisions in respect of potential impairment of trade receivables and unbilled amounts due on contracts” in the Middle East.
Like most developers in the region, and around the world, Nakheel has been hit hard by the financial crisis. Last month it announced that its $3 billion mall expansion program would be delayed by 12 months.
In February this year, it indefinitely delayed the start of construction of the Worlds of Discovery theme park project. The development, which will include four water theme parks, is being undertaken in partnership with the US-based Busch Entertainment Corporation.
In January, the developer announced that it would halt work on its one kilometer tall tower, the Nakheel Harbour & Tower, for a year. And in December last year, Nakheel confirmed that work on the Trump International Hotel and Tower in Palm Jumeirah had stopped, and that the project would be delayed indefinitely. It also postponed work on Frond N villas, Gateway Towers and The Universe. In November, the developer laid off 15 percent of its workforce – 500 employees.
Around the world, real estate has been one of the sectors hit hardest by the financial crisis. Deutsche Bank estimates that in the US, up to half of the $1.3 trillion in commercial property loans dues for repayment by 2013 could be ineligible for refinancing – a potential time bomb for developers, many of whom will not be able to repay the debt.
Being a government-owned company, Nakheel is eligible for a slice of the $10 billion raised by the Dubai government through a sale of bonds to the UAE Central Bank. Earlier this week, Nasser al-Shaikh, director general of Dubai Department of Finance, said that more than half of the $10 billion has been distributed to government-owned firms. He did not disclose names, but said the situation at these companies had improved. “All of the state-linked real estate developers have already started paying their bills,” he told Dubai Eye radio station.
It is claimed that the average contractor is owed £50m, while some consultants’ fees are being slashed in half. Roxane McMeeken finds out just how bad Dubai’s payment problems have become
Dubai is looking more and more like a place with a great future behind it. You can see that most clearly on the billboards erected beside empty sites and motionless tower cranes. “Ordinary is for other people” says the one where the Trump Tower was to have gone. Well, nemesis follows hubris: at least half of the emirate’s construction projects are “on hold” according to research firm Proleads, and nobody knows when, or if, they will start again.
New signs of the desperate state of Dubai’s developers are emerging every day. To look at the top three of them is telling: Union Properties has admitted it would welcome a merger after shelving its flagship £320m Formula One theme park in Dubailand. Emaar recently announced yet more cancelled projects: Asmaran (a 70 million ft2 , £17bn mixed-community scheme billed as “a jewel in the desert”), Maysan (three residential towers, also covering 70 million ft2) and Warsan (500 villas covering 3.4 million ft2). Meanwhile, Nakheel is facing a fraud investigation and has put its £2bn mall expansion plan on hold. It has also been hit by the halving of property prices on its celebrated Palm Jumeira project. Four-bedroom garden homes on a frond are going for £1.2m compared with £2.6m in July.
Where does all this leave the British consultants and contractors who count these developers among their top clients?
The short answer is, cash-strapped. Some are seeing their fees slashed – a Building survey of more than 150 people working in the UAE found that two-thirds of them have been asked to drop their prices recently. Others have been waiting for payments for six months and many are considering legal action.
What went wrong?
The first problem was that many developers were reliant on bank credit rather than oil revenue, as is often thought. Abu Dhabi, the capital of the UAE, has about 10% of the world’s oil, but Dubai has almost none. Banks were happy to keep lending to its developers as long as property prices were going up, and could act as collateral for more lending and more construction. But when property prices started tumbling, this virtuous circle turned vicious and clients ran out of money to pay consultants and contractors.
Abu Dhabi’s $10bn (£7bn) loan to Dubai announced in February appeared to offer a glimmer of hope, especially when the Dubai government said this money would mainly go to state-linked developers. But questions are being raised about how far it will go. For one thing, Dubai has declared that it owes at least $80bn (£56bn), of which almost a quarter falls due for repayment this year. The boss of a UK consultant with a large presence in Dubai says: “The $10bn won’t even cover developers’ interest payments.” He adds that compounding this is the fact that Dubai has so few ways to make money. Last year, 65% of its GDP was from real estate. He adds: “And there is no oil, no exports, no tax and 80% of the population are expats, many of whom are leaving.” Now the fee cuts are spreading to Abu Dhabi, where developer Aldar has written to consultants to ask them to cut fees – on live projects by up to 20%.
Late payments and fee cuts
So how bad has it got for UK firms? Certainly there is no sign that the government cash is filtering through. A senior source at a UK contractor in Dubai is fuming. He says: “The average contractor here is owed about £50m.”
A source at a UK project manager says some payments from Dubai developers are up to six months late; Mace and EC Harris are saying openly that it is taking at least three months to get paid. WSP is estimated to have set aside £4m to cover bad debts and project management consultancy Blair Anderson now employs someone full-time solely to chase payments in Dubai.
Meanwhile, the head of a British specialist working on a major project that stopped in October says his firm was paid 20% of what it was owed in January. He said he has no idea when he will get the rest, although he believes it will come through eventually, as his client is linked to the Dubai government.
Then there are the fee cuts, which are affecting most firms. Evan Anderson, group director of Blair Anderson, says the firm’s fees are between 20% and 30% lower than six months ago. But he is still better off than many architects, whose fees Anderson is renegotiating on behalf of clients. He says: “We are doing a lot of reverse briefing of designers. We’re asking them to cut their fees by up to half and to change the materials they’re specifying to bring down costs by about 30%.”
Contractors across Dubai are having to renegotiate tenders, typically resulting in 15-20% being lopped off their money. The senior contractor says: “Contractors here had been enjoying margins of seven, eight or nine per cent. Now clients are trying to get us to take margins as low as three or even one per cent. They also want to lengthen programmes so that cash flow is less onerous. It’s chaos.”
More pain for consultants is arriving in the form of deferred payment plans. Mark Prior, head of the Middle East for EC Harris, says: “We are discussing deals that would mean we will be paid in six months’ time – or half of what we’re owed in three months and the rest in six.”
Other companies are understood to have been forced to accept payment in the forms of stakes in a development. George Grant, operations director for infrastructure at M&E specialist Drake & Scull, says: “We have no experience of taking equity instead of cash but we would consider it. Our view is we want to work with the clients if it means that work goes ahead.”
“We are doing a lot of reverse briefing of designers. We’re asking them to cut their fees by up to half and to change the materials specified”
Evan Anderson, Blair Anderson
Others are more wary. Anderson has refused payment in shares: “They offer you 1% of a development that you have had no involvement on and no idea how it works. If you invest in something you want to do detailed research on it.”
Meanwhile, the old model of developers paying contractors with money from sales of units in buildings before it has been completed is a thing of the past. Projects launched on this model are being refinanced. Under the new deals institutional investors are brought in and contractors are forced to accept deferred payments.
Anderson says: “The previous model based on off-plan sales is no longer viable, so total financing is being done by investment, and selling is happening when the building is under construction.”
As a result, development is less gung-ho, he adds, which in turn means people are earning lower fees over a longer period. Developments are being built in phases. “Before, a developer would build three high-rises at once; now they are building them one by one. They build a tower, sell it, then use the proceeds to build the next one.”
Such is the state of the market that those who are actually getting paid do not want to admit it. Speaking on condition of anonymity, the head of a British architect’s Dubai office said: “I would rather you didn’t put my name in your article because if other people working for my client find out that I’ve been paid, they’ll be demanding that the client pays them too, and then I’ll have to answer to the client.”
He says at the moment you have the best chance of being paid if you are needed to help with the process of putting a project on hold. “If you are not essential – that is, if you are not putting remedial works in place so the client can put work on hold – you will not get paid.”
Will developers ever pay?
The gravest concern of all is caused by rumours that some developers are about to go bust. Despite their government links, there is no guarantee the state will step in to save these firms. A source at a project manager in Dubai says: “It’s impossible to say whether the government will pay developers’ debts or not. State sponsorship is relatively loose here. Nobody knows whether certain developers are going to be mothballed, merged or go bust.”
Drake & Scull’s Grant, a Middle East veteran, says: “There’s no doubt some clients have run out of money and will disappear. Not the big names though, they need to renegotiate their finance deals but they will carry on.”
He may be right, but the question of when they will pay is still causing UK firms to fret. Emaar, to take one developer, has just had its debt downgraded by Standard & Poor, the ratings agency, from –A to BBB+. It made a loss of 1.6bn dirhams (£304m) in the last quarter of 2008. Meanwhile, the government has warned that the economy may shrink in the second half of 2009.
Most developers are declining to comment on the payment issue, including Nakheel. A spokesperson from developer Limitless did speak to us and insisted that all creditors would be paid. She said: “We’re renegotiating some payment plans, but not all, as part of our overall response to the global situation.”
An Emaar spokesperson also sent the following statement: “Payments for contractors and consultants are based on a credit cycle and set deliverables agreed with them. All payments that meet the criteria have been honoured and will continue to be cleared, in line with our agreements.”
But for those still waiting to be paid and suffering, what recourse is there? Another source says: “Historically, if you’re not getting paid here, you don’t rock the boat; the last thing you do is resort to litigation. But now people are getting highly emotional. If you’re working on a huge project and you recruited a huge team to do it, and you’re owed millions, well maybe it is time to sue.”
He adds that he expects to see “some big disputes in the next three months”, which is perhaps ironic considering that Dubai is aiming to become a regional dispute resolution centre. Prior is among those who admit that “litigation is an option we have our eye on”. It’s a statement that would have been unthinkable in Dubai a year ago.
As the legal cases loom (see box, previous page), it’s clear that relations between clients and project teams are strained to the limit. The head of another UK consultancy, who asked not be named, revealed a conversation he had with a senior emirati working for a big developer. “I said to him, if I don’t get my money, I will sue. He said, you will never work in Dubai again. I said, why would I want to?”
Disputes in Dubai
–
Dubai’s legal system is facing a sudden rush of disputes, and there are doubts about how well it is going to handle them. The first problem is the absence of adjudication. Paul Taylor, a partner at lawyer HBJ Gateley Wareing, says: “Unlike in the UK, there is no quick fix in Dubai. Here, arbitration and litigation, are the only ways to get your money.” Even worse, arbitration in Dubai takes up to two years – even longer than in the UK.
Another problem is certification. Of course, getting an engineer’s certificate proving you have done the work and are therefore entitled to be paid is an important piece of ammunition in the fight for your fee. However, in Dubai, Taylor says many contracts include a clause saying that an engineer cannot approve a piece of work without the client’s sign off. “These clauses are being disputed, but it’s still tough.”
People are looking at alternative methods of resolving disputes. Next month a “mediation centre” is being set up that will fast-track dispute resolution through an independent party. Taylor says it is a mid step between amicable settlement and arbitration and could resolve a dispute in two or three weeks. The problem, though, is that it will only work if both parties voluntarily accept the verdict.
Most projects are on the FIDIC contract. The 1999 version contains a clause that allows the use of a dispute resolution board, which can take six to 12 weeks. Earlier versions of the contract do not tend to offer this option.
Even if you do resolve a dispute to your satisfaction, then you have the problem of enforcing the decision. Taylor recommends a “more commercial” way of tackling a dispute. “Knock on the client’s door and try to explain your difficulties face to face. And get your local sponsor to act as an intermediary.” As a last resort, you can threaten to terminate the work you’re doing for the client – an approach that will only work if the project is continuing.
More than 350 investors in Nakheel’s Palm Jebel Ali have signed a petition urging the developer to reschedule their payment plans because their villas will be ready four years late.
While land reclamation on the development, the second of Nakheel’s Palm trilogy, is complete and infrastructure work is under way, construction of the villas is yet to begin.
Investors were told in January the handover of property had been changed to 2012, having initially been scheduled for last June.
The letter referred to other developers who had revised payment plans because of the global economic crisis and said “as Nakheel is the region’s biggest developer, we expect the same or better”.
A Nakheel spokesman said the company was addressing the issue and working with the Dubai Real Estate Regulatory Authority (RERA) for a solution. This could involve a restructured payment plan. The spokesman told investors Nakheel would respond to the petition in “two to three days”.
“I was disappointed that we could not meet with the real decision makers, who we requested an appointment with,” said Saqib Iqbal, a representative of the investors group.
“We have paid for the last three years, so we wanted to get answers to our concerns.
The project has already been delayed by four years and there is no guarantee that even after four years it will be delivered.
So why, if something has been delayed for so long, are they still collecting payments? It’s completely irresponsible.”
Mr Iqbal has bought one of more than 1,300 villas planned for the development. “I’m an end-user and I want the project to be successful, but I also want it to be very transparent that if I’m making a payment, it is going towards constructing my villa.”
In response to the slowdown in the property market and liquidity shortages, RERA announced this year that the first 30 per cent of the sales price of a unit would be “up front” and not connected to construction, but the remaining 70 per cent of payments would be linked to construction progress.
The move was expected to remedy a widespread situation in Dubai where a buyer may have paid a significant percentage of the price to the developer when construction had only just begun.
RERA is also encouraging developers to adjust their payment schedules to allow buyers more time to pay and reduce the risk of default. Firms including Deyaar Developments, Union Properties and Emaar Properties have already announced new payment plans.
Villa prices at Palm Jebel Ali fell about 45 per cent during the last quarter of last year, with some “distressed sellers” now selling their units at Dh800 per square foot, compared with more than Dh2,000 when the project was launched.
Some Problem Deals In Real Estate May Dent Trust By MARGARET COKERApril 29, 2008; Page C2
DUBAI, United Arab Emirates — This city-state’s real-estate market is booming. Massive building projects scrape the sky. Sales and rental prices appear buoyant as investments flow in from other oil-rich Persian Gulf states, the former Soviet Union, India and Iran.
But a series of legal tussles and property-related scandals could dent foreign-investor confidence and tarnish the business-friendly reputation the government has tried so hard to burnish. Earlier this month, the chief executive of one of Dubai’s largest publicly traded developers was jailed. And two disputes involving European and U.S. investors have raised concerns about Dubai’s regulatory and legal safeguards. Foreigner-Friendly
The U.A.E., a collection of seven, semiautonomous emirates, was the first of the Arab Gulf states to allow foreign-property ownership. The country, a major oil producer, remains at the center of the Gulf region’s construction surge. More than a third of the estimated $1.2 trillion in projects under way in the region are in the oil-rich U.A.E., according to a report by the London-based Middle East Economic Digest, which tracks building projects.
While Dubai lacks the big oil reserves of its neighbor Abu Dhabi, it has diversified away from petroleum, building a reputation as a hub for tourism, business and transportation. Crucial to that strategy are its development projects. Dubai has regaled tourists and investors alike with megaprojects such as the construction of Burj Dubai, the world’s tallest building, and the planned Palm developments, three separate man-made island clusters in the shape of palm trees.
“The perception of Dubai is based on the Burj, the Palm trilogy and sunshine 365 days a year. So far, you could call it a successful marketing campaign,” said Martin Kohlhase, a senior analyst in Dubai for Moody’s Investors Service, the credit-rating company. “There is so much at stake.” Marwan bin Ghalita, chief executive of Dubai’s Real Estate Regulatory Agency, said he has worked hard over the past few months to improve rule making and enforcement among Dubai’s 742 licensed developers. “We are doing a very good job, but there are still lots of things to do to achieve awareness about the rules and procedures here,” said Mr. bin Ghalita.
Deyaar Development PJSC said earlier this month that its former chief executive, Zack Shahin, had left the company and was being held by Dubai police. The company, listed on the local stock exchange, disclosed the moves after the Zawya Dow Jones wire service reported the arrest. Mr. Shahin, a U.S. citizen, is being held as part of an investigation into alleged financial wrongdoing at the company. In a jail-house interview, he told the wire service he was innocent.
Mystery has shrouded the case, raising concerns about the extent of its repercussions on the company, one of Dubai’s biggest developers. A Deyaar spokeswoman declined to comment. Another project — on the Palm Jebel Ali archipelago, one of the three clusters — also recently became a battleground between a Dubai developer and disgruntled investors. In 2003, Damac Properties, one of Dubai’s largest private developers, sold apartments in a 25-story building, known as Palm Springs. The company targeted British investors, eager to snap up retirement or rental properties.
Last month, Damac sent letters to those investors, saying the project had been canceled, giving few details. When investors pressed, they were told Palm Jebel Ali’s government-controlled master developer, Nakheel PJSC, hadn’t given Damac suitable land on which to build. ‘Out of the Blue’
Damac promised to return investors’ money, plus 6% interest, or give discounts on another Damac property. The Palm Springs apartments were sold for about $220 a square foot, according to investors. Current market prices in the same area are as much as $890 a square foot. “It came out of the blue,” said Colin Murray, who lives southwest of London and bought two Palm Springs apartments.
Mr. Murray helped band together 80 investors in the United Kingdom. They filed a formal complaint with Dubai’s Real Estate Regulatory Agency. Nakheel denied it had caused the project cancellation, and regulatory officials launched talks between Nakheel and Damac. Damac then told investors that the project was back on.
The agency’s Mr. bin Ghalita said Dubai law gives Damac six months to start construction. He said he “would be keeping my eye” on the situation.
The controversy over Palm Springs was just the most prominent in a series of property-investor complaints. The local English-language press has reported stories of middle-class families being bilked by unlicensed brokers or unscrupulous developers who have taken large deposits and failed to deliver. And then there are delays in finishing construction. Damac has completed only 18% of its $30 billion real-estate portfolio. Financiers in Tussle
It isn’t only small investors getting ensnared. U.S. private-equity firm Capital Partners, a real-estate-development arm of McKinley Reserve, of Wisconsin, is in a $1 billion legal dispute with Tecom Investments, a subsidiary of Dubai Holding, which is owned by Dubai’s ruler, Sheik Mohammed bin Rashid Al Maktoum.
In 2005, Capital Partners and Tecom signed a contract allowing the Americans to develop a 15-hectare site called Riverwalk. Months later, however, the deal had turned sour. Capital Partners accused Tecom of selling it land that it didn’t own, specifically, almost a hectare that was a designated archaeological site.
With $10 million already sunk into the project, Capital Partners refused to make a scheduled second payment to Tecom until the ownership issues had been worked out. Tecom said that missed payment was grounds to terminate the contract. The case is before the Dubai International Arbitration Center, an independent tribunal.
Damac have finally sent written confirmation of the re-instatement of Palm Springs to investors.
Whilst the Palm Springs Group is pleased with this development, the communication merely rubber stamps what has already been issued to the press.
The main concern now for investors is that Damac confirm in writing details of the project, such as the plan specification, build quality, start and handover dates, and whether it is in keeping with the original contract.
One investor commented, “we will be writing to Nakheel and Damac requesting them to disclose the new plot handover date and details of any planned changes as a matter of urgency” She went on to say that the Group intend to monitor developments to ensure that any changes are compliant with the contract provisions. It is possible that investors may request a meeting with Damac to get clarification of the details and to iron out any concerns.
Barring any nasty surprises contained in the ‘detail’ of the re-location of Palm Springs, it would seem that both investors and Damac will soon be able put their differences behind them and look forward to the dream that was, and hopefully is, Palm Springs.
Let’s hope Nakheels’s and RERA’s role in helping to resolve the crisis serves to strengthen the reputation of Dubai real estate.
Investors have said they stand to lose million of dirhams after the Dubai-based developer cancelled the 25-storey beachfront development last month on the Palm Jebel Ali, offering compensation below current market value.
The saga has been widely reported in the international media, creating bad publicity for Damac in key markets it is looking to attract investment from, such as the UK.
Investors said they received calls earlier this week from Damac informing them the Palm Springs project is to be re-instated, according to a statement on the website of a Palm Springs investors group.
The project will be located on the new plot provided by master developer Nakheel, with some possible changes to building plans, the statement says.
Niall McLoughlin, senior vice president of corporate communications at Damac, said in a statement emailed to ArabianBusiness.com on Thursday that the developer would shortly announce a decision on the project.
“We have been in contact with our customers in relation to Palm Springs and will be making a formal statement in due course. As soon as I am in a position to comment, we will contact you directly,” McLoughlin said, without giving further details.
Damac had said the cancellation of the project five years after launch was due to “redevelopment of the plots”, stating that the development “cannot be situated on the re-allocated plot”.
However, this explanation was brought into question when Palm Jebel Ali master developer Nakheel said it had informed investors of changes to the masterplan over 10 months ago.
A group of more than 60 UK-based investors are threatening to take Damac to court unless the developer reverses its decision and continues with construction.
The group, which last month stormed the London launch of Damac’s Jumeirah Village South project, has given the developer until April 11 to change its mind or face legal action.
Damac also changed its mind about the cancellation of its Haz Tower in Business Bay on Wednesday, after investors complained about its plans to pull the project, UAE daily Gulf News reported.
The Haz Tower was launched in July with a value of around 240 million dirhams. The tower is now worth an estimated 660 million dirhams, the newspaper said.
Posted in Dubai | Tagged: Damac Dubai, Jebel Ali Palm Dubai, Nakheel, Palm Spring | Comments Off on Damac Properties appears poised to formally announce the reversal of its decision to axe the Palm Springs project, according to investors.
If the Palm Springs project ‘cancellation’ by Damac is anything to go by, then Dubai’s reputation as a premier and safe place to invest in real estate is heading for a nose dive. And it seems that the Dubai government is happy to sit by and watch investors being ripped off. If appropriate action is not taken soon, then contracts written by Dubai businesses will not be worth the paper they are written on!
A group of distressed investors (284 to be precise) are suing Tameer Holdings over its failure to deliver apartments that were supposed to be handed over this year. Investors have rejected an offer of 25% on top of the money they have invested.
In spring 2004 investors signed contracts with Tameer Holdings to purchase apartments in Al Ameera Residential Tower development, Sharjah, expecting to move into their new homes in August 2008. The Al Ameera residential tower was to be the largest of its kind in Sharjah mirroring its counterpart in Dubai, the Princess Tower. But that was then.
In August 2005 the buyers received a letter stating that the Al Ameera Tower project had been delayed due to the lack of a licence, resulting from a delay in the implementation of a new real estate ownership law. It is mind boggling that Tameer were selling real estate with contracts that were relying on a yet un-enacted law! As far as we know the law in Sharjah hasn’t changed since the seventies. By any standards, Tameer have misled investors, and their actions need to be investigated by the Dubai government.
The picture of Dubai real estate that seems to be emerging is one where fraud is being overlooked by the government. It is simply not acceptable for Tameer to claim that Sharjah’s property ownership law stipulates that non-GCC nationals can own a 99-year leasehold but not freehold and therefore foreigners were legally not entitled to buy into Al Ameera. Why sell to foreigners when they knew very well this to be the case?
Tameer recently awarded the Arabian Construction Company with the honour to help materialise the Princess Tower by 2009. The tower, based in Dubai Marina, also announced in 2004, is expected to stand over 380 metres high, which would make it the world’s tallest residential tower.
This summer, Tameer made it clear that the law did not allow expatriate ownership and advised that it would cancel all contracts with non-GCC nationals. What happened with local prospective owners is not clear.