So Wake Me Up When It’s All Over!

dubai-pearlIt is five years ago this week (25 November 2009) when the emirate shook the financial world as Dubai World declared that it was not in a position to repay its then debts. A lot has obviously changed since then – but it does seem that mega projects are back. Some estimate that GREs (government related entities) are set to spend up to US$ 200 billion over the next decade, including US$ 93 billion already confirmed for projects such as Dubai World Central, Mohammed bin Rashid City and Expo 2020.

Not before time, work is scheduled to restart next month on the much troubled US$ 6 billion Dubai Pearl project, overlooking Palm Jumeirah. An investment consortium, headed by the Al Fahim Group, is to go ahead with the existing plans of 1.5k apartments, seven 5-star hotels, a 1.6k seat theatre and 60 restaurants and now expect to complete by 2018 – some 15 years after its 2003 launch. Earlier in the year, Hong Kong’s Chow Tai Fook Endowment Industry Investment Development (CTFE) bought a US$ 1.9 billion stake in the venture.

As widely expected, the Emaar board approved a special US$ 2.45 billion cash dividend which equates to roughly US$ 0.36 per share. This comes seven months after the US$ 2.2 billion dividend in April, comprising a 15% cash dividend and a 10% bonus share issue. Interestingly, the company reported a US$ 678 million 9-month profit ending 30 September (equivalent to just over 30% of the latest payout) but had a hugely successful IPO of its Malls Group which has helped to finance this windfall for investors.

The Nakheel eight-building Warsan Souk, located near International City, has been almost fully leased. The project – comprising over 1k shops and 30 food outlets – is directed mainly at local businesses and SMEs.

The six-year old Wasl, an asset management group owned by the government’s Dubai Real Estate Corporation, has announced that it will sell 405 freehold apartments in its already completed Creek Heights development. Initially built by Dubai Properties to be a hotel, it was taken over by Dubai Land Department, under its 2011 Tanmia initiative (which saw DLD act as a mediator to solve any issues, between investors and developers, when the progress of certain projects had reached an impasse). Wasl will also take over the running of the 5-star Hyatt Regency Dubai Creek Heights along with the conference facilities.

Flydubai – via its parent, Dubai Aviation Corporation – has raised US$ 500 million through a heavily subscribed landmark 5-year sukuk at a 3.776% profit rate – an indicator of how well the market rates the budget carrier ( and the Dubai economy).  The 5-year old airline has just received a major award being recognised as the “world’s most innovative and influential low cost carrier” by CAPA.

Dubai World Central is planning to build a significant number of warehouses in its 21 sq km logistics park and will try to attract a blend of SMEs and multinationals before 2016. In Q3, the new facility moved 243k tonnes of freight and expects considerable expansion. IATA recently reported that ME cargo growth was up 17%, in direct contrast to Europe where there was a 1.6% contraction.

Damac announced that it expects to open two new hotels in Q1 2015. The Cour Jardin and Capital Bay will be located in Downtown, with the Dubai-based developer expecting to have a portfolio of 10k serviced hotel rooms by 2018.

With the cruise season in full flow, it is expected that Dubai will see a 19% jump in arrivals this year to 381k and an increase in cruise ships to 110. This number is expected to rise to over 450k passengers next year, as lines like Royal Caribbean, Costa, MSC and TUI return to the Dubai market – with Mina Rashid’s new 27k sq mt terminal allowing the handling of five cruise ships at any one timeMeanwhile DP World is in talks with the world’s seventh busiest container terminal, Qingdao, not only to expand trade between Dubai and the Chinese port but also to develop a cruise link.

Having being closed for the past ten months, in order to carry out a US$ 27 million refurbishment, the Pullman Deira City Centre has reopened its residences.

Following a US$ 31 million settlement with the Egyptian government, over a protracted land sale dispute, the Al Futtaim Group is planning to invest US$ 700 million in phase 2 of its 32 million sq ft Cairo Festival City development. The project has been delayed since 2010 and will include 500 residential units, 100 shops and a hotel.

The Dubai Gold and Commodities Exchange (DGCX) saw October business up 28% compared to a year earlier, with monthly volumes topping the one million mark for the second time this year. As usual, the currency segment dominated with 93.7% – or 978k – of total contracts.

Depa, 24% owned by Arabtec and listed on Nasdaq Dubai, reported a Q3 profit of US$ 5.2 million, despite a 10.4% fall in revenue to US$ 141 million, compared to a US$ 6.0 million loss in the same period last year. Its order backlog of US$ 717 million was 8.9% up, quarter on quarter, with the main drivers being interior contracting for the hospitality sector accounting for US$ 354 million, and its Asian business, a further US$ 260 million.

Troubled developer, Union Properties, has announced the launch of phase 3 of the Green Community – 210 villas and 22 duplex apartments Completion of the Dewan Architects-designed development is expected within 30 months.

As expected, Dubai Investments’ first foray into the burgeoning education sector is to build a non-profit making university in Dubai Investment Park. A MoU was signed with the Lebanese University of Balamand, which will offer 70 undergraduate and 55 postgraduate programmes.

Destinations of the World, a Dubai-based B2B travel operator, has sold 57.5% of its business to Gulf Capital. It was the Abu Dhabi equity firm’s biggest management buyout to date.

The Dubai-based Islamic mortgage lender, Amlak, 44% owned by Emaar, has finally signed a US$ 2.7 billion debt restructure deal with its creditors. The company was suspended from the DFM in 2008 but with this settlement its shares should soon be tradable again.

In order to refinance an existing US$ 380 million facility and to provide for future expansion, Dubai-based Topaz Energy and Marine hopes to raise a US$ 550 million, 7-year bank facility in Q1 next year.

Following the recent sale of 16% of Arabtec Holdings, it is reported that the former chief executive, Hasan Ismaik, is planning to sell the remainder of his share portfolio (11.8%). The 38-year old Jordanian will be lucky to get the same return of US$ 1.36 per share this time, as the current market price is currently 20.6% lower at US$ 1.08.

Having fallen 2.0% the previous seven days, the DFM fared little better this week dropping 1.5% from its Sunday opening of 4563 points to close Thursday on 4494. Bellwether stocks, Emaar Properties and Arabtec, were little changed, trading at US$ 2.98 and US$ 1.08 respectively.

It is difficult to ascertain how much banks make from their customers’ foreign currency transactions. It seems that HSBC has been charging what they consider too much and have refunded some UAE clients amounts that were contrary to their terms and conditions. Generally, banks will have to become competitive and transparent with such fees as money changers tend to have lower transfer fees, better exchange rates on offer and an increasing number of dissatisfied bank customers.

With the 02 December National Day fast approaching, HE Sultan Al Mansouri, the Minister of Economy, highlighted the fact the UAE has expanded 236-fold in its 43 year history. Over that period, the country’s GDP has grown from just US$ 488 million to its current level of US$ 114.2 billion. The minister expects the economy to grow by 4.8% this year – and at similar levels over the next five years – with inflation rates of between 2% to 3% over the same timeframe.

Russia’s economy is reeling under the cost of falling oil prices (US$ 100 billion) and the Ukraine sanctions (US$ 40 billion). Finance Minister, Anton Siluanov can do little to stop the rouble tumbling to all-time lows, trading on Thursday at 45.2 to the US$ (compared to 33.1 a year earlier). The Q3 24.0% fall in Sberbank’s (the country’s largest bank) profit to US$ 1.53 billion is reflective of the economic malaise facing Russia with the prognosis that there is a long winter ahead for the nation.

Oil prices continue to fall following OPEC’s decision on Thursday not to tinker with the supply valve. With Brent crude trading at  around the US$ 73 level, the two big losers could be Russia and the US shale oil sector – both suffering because they are losing as these prices are well below their break even points.

Globally, business confidence has taken a hit as Markit Global Business Outlook Survey recorded its lowest ever level. There are numerous factors in play with the main ones being geo-political problems, especially in the Ukraine and the ME, the inevitable interest rate rise in the US and UK and the global slowdown, especially in the eurozone and emerging markets.

Despite Germany’s protestations, it is increasingly likely that ECB president, Mario Draghi will finally bite the bullet and belatedly start a program of government bond purchases, in a vain attempt to pull the eurozone from the abyss of a deflationary spiral. Even the OECD has suggested that the bloc could be stuck in persistent stagnation because growth has been undermined by insufficient policy stimulus.

To get some growth traction in the flagging eurozone, Jean-Claude Juncker, the newly appointed EC President, has released plans of a US$ 393 billion investment plan. This includes US$ 26 billion (or 6.6% of the total) of EU-funded seed money, with which he thinks that private investors will be lured to invest the balance of US$ 367 billion. It must be remembered that when QE3 ended in October, the US Fed had bought up to US$ 4.5 trillion in financial assets.  If Juncker were to make this work it would be bigger than the miracle of the five loaves and two fishes. So Wake Me Up When It’s All Over!

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