Non, Je Ne Regrette Rien!

rolls-royce-dubaiThe boom in the luxury vehicle sector continues at an ever-increasing pace. Rolls Royce recorded a July sales hike of 117% and Lexus came in with a 26% rise in H1 revenue, whilst Bentley recorded a 29% jump in UAE H1 sales; their regional figures were helped by huge rises in Oman and Bahrain at 114% and 90% but interestingly, the UAE and Saudi Arabia still remain that company’s biggest two global markets.

Last month proved a stellar one for Nissan which reported that its Patrol model showed a 103% surge in sales of almost 3.9k models in the Middle East of which 39.1% (or 1.5k units) emanated from the UAE. This is yet another indicator of the buoyancy in the motor segment as H1 figures indicate a 17.6% jump in Japanese passenger car imports to US$ 1.6 billion.

In the wake of its recent 80-day maintenance and upgrade, Dubai International will soon have the capability to handle 36% more aircraft from 33 to 45 an hour. This is as a result of the introduction of an expanded facility for “high speed turn-off”. Within a decade, the airport will double its current 600k annual movements to 1.2 million. With these figures, the new airport at Jebel Ali could be under-utilised.

As local consumer confidence continues to bubble, it is predictable – and slightly worrying – that there has been a 21% increase in outstanding credit card bills, according to a new Lafferty Group report.

Azizi Developments has launched a US$ 37 million, 99 apartment development, a month after releasing a similar project in the same Al Furjan location. The Azizi.Iris project follows the Azizi.Orchid Residences, ready for completion by the end of next year.

Following its successful 2013 launch of Akoya by Damac, the Dubai developer has announced Akoya Oxygen, a residential development surrounding yet another golf course. Covering a massive 55 million sq ft, the project is slated to have the “greenest living spaces in Dubai” with parks, open spaces and even a forest of four thousand trees.

Likewise, Indigo Properties hope to start work on their 350-villa, US$ 409 million Zen project, adjacent to Arabian Ranches, early next year. The price of the villas will be around US$ 1.4 million and the 4.5 million sq ft development will have a Far East theme with parks, meditation zones and running waterways. However, the company is concerned that, because of a backlog in the approvals process, caused by the high number of new developments, there could be a long delay in finalsing all the required paperwork; this, in turn, could put back the construction start date.

According to a recent EC Harris report, there is currently US$ 212 billion of UAE projects under construction, with the 2014 total of both announced and planned projects coming in at a staggering US$ 315 billion.  Another report – by Jones Lang LaSelle – indicated that US$ 5.4 billion of residential contracts were awarded in the emirate in H1. With these figures, it is little wonder that there will be an inevitable backlog in start-ups.

Following their first UAE investment in Dubai, Star Tower, the Italian developer, Preatoni, has opened a local sales office. The company has already invested over US$ 3.3 billion in the MENA region and will be likely to announce more Dubai projects.

Nakheel has awarded infrastructure work to the value of US$ 16 million to Ghantoot Road Contracting. The work will be carried out in the developer’s phase 2 Al Furjan master community, covering 1.2 million sq mt, and should be completed within the year. The company also awarded a US$ 38 million contract to Metac General Contracting to build 84 villas, and eight retail blocks, on its upcoming Jumeirah Islands waterfront park project.

As expected, Nakheel has announced the early repayment of its entire bank debt of US$ 1.50 billion, having repaid US$ 650 million in February. Of the total, 62.3%, or US$ 940 million, will go to local banks, whilst the balance of US$ 560 million being paid to overseas financial institutions.

Brookfield Multiplex has won a US$ 75 million contract to build phase 1 MAF’s new City Centre in International Media Production Zone. The initial stage will see sixty international retail outlets, covering 1 million sq ft, and will include a 92k sq ft Carrefour Hypermarket, as well as a 750-space car park.

It seems that Indian nationals are pouring more money into local realty as latest Dubai Land Department figures show a 31.3% increase in their property investment to US$ 2.86 billion in H1, compared to the same period in 2013. In turn, Indians were the biggest foreign investors accounting for 28.0% of the total of US$ 10.2 billion, followed by British and Pakistanis at US$ 1.58 billion and US$ 1.23 billion respectively. Overall, H1 property deals were up 4.6% to US$ 30.8 billion. Rather surprisingly, Russian and Chinese investors were ranked 6th and 8th behind nationals from Iran and Canada.

As reported earlier in the month, July was a disastrous month for Dubai hoteliers as occupancy rates – for the 70k rooms in the 351 hotels – sank to 45% – an 18-year low. With a further 83 hotels – totalling 24.3k rooms – coming on stream, it is inevitable that hotels will struggle to maintain previous years’ levels. At least for the short-term, the premium end of the market may have reached saturation level emphasising the need for more budget-rated establishments.

Dubai Investments Park reported a 10.5% rise in H1 warehouse leases with 86 new companies taking up space. Having launched phase 8 only last year, the park is now almost 100% occupied, having leased nearly 1 million sq ft of warehousing in H1.

To take advantage of the more favourable terms currently on offer, Dubai Duty Free has decided again to reprice its July 2012, six-year US$ 1.75 billion split  loan and its September 2013 US$ 750k loan. The former was divided evenly between US$ and dirham, both at 325 basis points over Libor, which was further negotiated last year to 250 and 225 bps and now further renegotiated to both be at 175 bps. The later loan was initially at 225 bps and has now been reduced to 175 bps.

Although Emaar Properties has yet to take a final decision on its retail business IPO, there are indications that the announcement could come as early as next month. The listing could be on the local bourse and with a figure of US$ 2.5 billion being bandied around, it would bring a welcome boost to the local market.

DEWA has released tender documents, for phase 2 of the 100MW MBR Solar Park, to a 24-developer short list; the value of the contract is in the region of US$ 272 million. When completed in 2030, the park is expected to have cost US$ 3.3 billion and will produce 1k MW. DEWA is actively looking for a 49% partner for this massive project.

Gulf General Investments Co reported a 23.2% hike in Q2 net profit to US$ 8.5 million as H1 profits actually dropped 7.0% to US$ 14.8 million.

It has taken Apple six months after their CEO, Tim Cook’s February visit, to announce that the company will be opening a ME store – with Dubai the obvious choice.

The country’s Q1’s non-oil trade reflects its continuing economic growth as it reached US$ 69.7 billion with imports at US$ 45.3 billion, exports – US$ 8.2 billion and reexports – US$ 16.2 billion.

Forbes has ranked Dubai as the world’s 7th most influential city, only bettered by the likes of London, New York and Paris but ahead of Beijing, Sydney and Los Angeles. Some of the criteria used included air connectivity, racial diversity, number of regional head offices and the amount of FDI (foreign direct investment) it generates.

In a bold move to attract major asset managers, the DIFC has created a new class of funds that can be managed by senior and experienced managers which will require less supervision and regulations. The aim of the exercise is to attract more funds than the nine that are already domiciled in Dubai. The newly created QIF (qualified investor fund) is more flexible with a lower minimum subscription of only US$ 500k and can only be offered via private placements, with a maximum of fifty investors allowed.

Meanwhile, Jeff Singer, chief executive of the DIFC Authority, resigned with immediate effect after only two years in the position. Prior to that, he had been in charge of Nasdaq Dubai.

There was some disappointing news for Dubai SMEs with Standard Chartered announcing that it was planning to largely exit this segment. This follows a US$ 300 million settlement with New York authorities for their failure to closely monitor high risk transactions originating mainly from Hong Kong and Dubai. It seems that certain low risk, higher return clients will be retained by the Dubai-franchised bank.

The DFM reported that, with the exception of Amlak Finance, which is currently suspended from trading, the remaining forty-one listed public joint stock companies have followed regulations and all have issued their H1 financial results.

With a 1.6% rise the previous week, the Dubai bourse opened on Sunday at 4813 – and closed the week up 2.0%, again on very thin trading, at 4908. So far this year, the market has jumped 45.6% from its 01 January opening of 3370. Bellwether stocks, Emaar and Arabtec closed on US$ 2.85 and US$ 1.16 respectively.

Following an agreement to merge with Irish-based Fyffes, to form a company, with over US$ 4.6 billion in revenue, US-based banana producer Chiquita has subsequently rejected a US$ 611 million takeover bid by Brazilian companies – Cutrale and investment bank, Safra. One benefit for Chiquita would be that it could relocate its HQ to Ireland and, by utilising tax inversion, it could reduce its tax liability – a loss for the US Treasury but a gain for the Irish exchequer.

Going against current thinking, BHP Billiton, the world’s biggest miner, wants to contract so as to make operations quicker and to improve efficiency. The “Big Australian”, that saw its latest annual profits up 23% to US$ 14 billion, wants to demerge US$ 14 billion of its assets and form a spin-off metals and mining company, to be based in Perth.

Allied with a softening in July growth, China’s economy received a further knock with an H1 drop in incoming foreign investment to US$ 71.1 billion and a July return of US$ 7.8 billion – its lowest in the past two years.

Time is quickly running out for the eurozone as unemployment levels still remain stubbornly at double-digit levels, business growth stalls, manufacturing is losing traction and geo-political problems are beginning to take their toll. The bloc will have to take drastic steps to address the problems of low inflation (currently at 0.4%), patchy investment growth, high public debt levels and the over-valued euro. Quantitative easing can only be a matter of weeks away – if not, we will see its third recession in the past six years. Even then, the eurozone will see the start of  a phenomenon known as secular stagnation which will result in the continent falling further and further behind the rest of the world and will not return to the halcyon days of pre-GFC.

Having lost public confidence and his economic policies in tatters, Francois Hollande, has promised to accelerate long-needed structural reforms, cut back on red tape and introduce tax reforms.  With France recording another quarterly zero growth in Q2, its lowest housing starts since 1999, unemployment at 10.2% and a budget deficit of 3.8%, that exceeds EU targets, the beleaguered president is struggling to placate his electorate and is facing possible sanctions from his continental peers. He is blaming the eurozone’s austerity programme for his country’s problems and he will probably never admit that many of France’s economic woes can be laid at his door – Non, Je Ne Regrette Rien!

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