The Times They Are A Changin’

pyramids-egyptProperty developer Nakheel has defended its right to increase villa extension application fees which, in some cases, have risen quite dramatically. Prior to September 2014, the standard tariff ranged from US$ 41 per sq ft in its Jumeirah Village development to US$ 163 in Palm Jumeirah. Then it was announced that the fee would be raised to US$ 545 per sq ft for Palm residents wishing to add an extension to their existing property. Although its tenants are none too happy with this development, Nakheel is holding firm. (In contrast, residents living in an Emaar development are subject to a flat US$ 545 fee).

St Regis Hotel announced Dubai’s first polo resort in association with the Al Habtoor Group. The 136-room hotel will be the focal point of the development that will include a polo club, 24 luxury bungalows, 138 villas, 500 stables and several restaurants.

A new Knight Frank report estimates that H2 Dubai villa prices fell 6.2% but for the year showed a marginal 0.8% increase.

Landmark Group is planning to invest US$ 41 million, over the next three years, in adding a further 20 iCARE clinics to its current Dubai portfolio of six.

Dubai Investment Properties (DIP) has signed an agreement with Yotel to operate a 42-storey, 438-key hotel adjacent to the new Dubai Water Canal Project. The development will also include 127 serviced apartments and should be finished within three years. The Kuwait-managed company currently runs four establishments in New York and has seven more under development.

A new  US$ 108 million JV between two Dubai-based companies – Habtoor Leighton Specon and Drake & Scull – will carry out all the mechanical, electrical and plumbing on the upcoming US$ 1.1 billion Jewel of the Creek project. The work involves five tower blocks (of between 15-19 storeys), including residential, hotel and serviced apartments, and is slated for completion by June 2017.

It is reported that the Al Futtaim Group will close three of its stores in Singapore citing that there are too many malls and not enough shoppers in that city. One Marks & Spencer outlet and two John Little stores will soon shut down. The Dubai-based company still controls Robinson & Co which includes John Little, Marks & Spencer, Principles, Trucco, River Island and Fat Face in its portfolio.

MAF announced that it is planning to invest a further US$ 590 million in Egypt, in addition to the US$ 2.4 billion already scheduled for projects earlier. This last tranche will be used for the construction of four shopping malls and several VOX cinemas in Greater Cairo. The property developer is not the only Dubai entity that sees great opportunities in rebuilding that country’s shattered economy and infrastructure.

Egypt is planning to spend nearly US$ 45 billion establishing a new capital for 7 million. Located east of Cairo, the area will cover 700 sq km and should be completed by 2022. The announcement was made at a major investment conference in Sharm el-Sheikh attended by HH Sheikh Mohammed bin Rashid Al Maktoum and Egypt’s president, Abdel Fattah El Sisi. Emaar chairman, Mohamed Alabbar, signed the land deal with Minister of Housing, Mustafa Madbuli.

However, despite all the recent hype relating to mega projects in Egypt, it is reported that Emaar is not involved in the development of the new capital city. It appears that Capital City Partners, a private real estate investment fund headed by its founding partner, Mohamed Alabbar, will manage the new city’s construction.

According to reports, Arabtec has already agreed some of the terms with Egypt’s Housing Ministry relating to the US$ 40 billion project to build one million houses. A potential sticking point, prior to the final contract being signed, is the number of gratis units to be handed over in lieu of the land payment.

JAFZA reported a 9.8% hike in 2014 revenue to US$ 458 million, as its debt level fell 6.2% to US$ 1.23 billion. Profits were higher following a one-off gain from Dubai World which acquired the Economic Zones World, the parent company of JAFZA, for US$ 2.6 billion last December. (It appears that DP World will also take over the US$ 859 million net debt).

Meanwhile DP World recorded an 11.7% jump in profit to US$ 675 million, as revenue rose by 11.5% to US$ 3.41 billion. A US$ 0.235 dividend was approved.  At the end of 2014, the company had 77 million TEU capacity, with a further 8 million twenty-foot equivalent units to be added this year, with new facilities coming on line in Turkey, India and the Netherlands as well at Jebel Ali.

It seems that DP World’s majority shareholder, Port and Free Zone World, (a subsidiary of DP World) has finalised a US$ 1.1 billion, 5-year loan to be utilised for meeting its upcoming financial commitments. The facility is reportedly priced at 2.25% points above Libor – a much better rate than the 3.5% it paid on a September 2011 loan.

Dubai Silicon Oasis reported 2014 revenue of US$ 138 million as profit jumped 43%. Over the year, the freezone operator saw a 28.9% increase in operating companies to 1.15k, 63% of which were in the IT sector.

Several government related enterprises (GREs) are planning a seven-day exhibition in Beijing to showcase what Dubai has to offer, with the aim of expanding trade and tourist links. Over the past year, trade has risen by 27.0% and now stands at over US$ 34 billion for the first nine months of 2014. It is estimated that Dubai is home to at least 200k Chinese who run over 3k companies. Tourist numbers have shown healthy increases in recent years and the 25% rise last year saw numbers top 344k.

Du shareholders approved a dividend of US$ 0.054 per share, in addition to the US$ 0.033 interim paid earlier. This follows the 22.8% hike in 2014 net profit before royalty of US$ 1.01 billion.

Dubai-government owned Enoc is looking at buying out the remaining 46% shares it does not currently own in Dragon Oil. The offer made last Friday was at the market price (US$ 7.37) plus an undisclosed premium. Since then the share price has risen and closed on Thursday at US$ 8.72 – 17.2% up on its 15 March price of US$ 7.44.

Dubai has a monorail, a metro and a tram system and now Emaar is currently testing a trolley tram for use in Downtown. When testing is finished and stations built, the hydrogen and electric-powered trolley trams will operate across the whole 7km span of the area.

The latest business to be listed on the local bourse will be Daman Investments. The asset management firm, established in 1998, will sell 55% of its shares in the IPO with listing taking place in April; the company will be hoping that market conditions have improved by then. Three years ago, the company privately sold a 22.7% stake for US$ 120 million.

The DFMI started the week trading on Sunday at 3708 and dropped 6.3% to close at 3473 on Thursday, and 8.0% lower than its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, were both down by US$ 0.14 and US$ 0.08 to US$ 1.92 and US$ 0.71 respectively. Trading on the day was low with 196 million shares, valued at US$ 157 million, being transacted; total market capitalisation was at US$ 25.4 billion.

Another major bank has been caught for illegal activity. Germany’s Commerzbank has had to pay US authorities US$ 1.45 billion for breaking sanctions in dealings with Iranian and Sudanese businesses. Belatedly, the country’s second biggest bank has indicated that it will address the deficiencies highlighted by the US authorities. Last year, BNP Paribas paid a massive US$ 8.9 billion whilst the likes of Standard Chartered HSBC and Credit Suisse have been apprehended for similar illegal behaviour. 

Although Cold Play’s Chris Martin and Gwyneth Paltrow had a successful decoupling last year, it seems that the US is having difficulty in decoupling from the rest of the global economies. The outcome from this week’s long-awaited Fed meeting was that it was in no hurry to lift rates and the pace of any future rises would be slower than initially expected.The dollar’s strength is curtailing economic growth, making US exports more expensive and not helping the country’s too-low inflation – 0.2% in January. However, the first rate hike since 2007 will still occur this year but a little later than analysts had expected and then watch what capital outflows from emerging economies will do to the markets.

The IMF chief, Christine Lagarde reiterated what many already know – the global recovery “is too slow, too brittle and too lopsided”. She warned eurozone and Japanese authorities of the risk of continuing low growth and low inflation which, in turn, will result in high unemployment and rising debt levels.

Brent closed on Thursday (19 March) at US$ 54.43, as market indicators point to more turmoil in the market. Kuwait reiterated OPEC’s stance that there is no other alternative but to continue to produce at current levels in an oversupplied market just as Saudi sees recent output up some 3%, touching 10 million barrels per day, and exports rising to 7.5 million. Furthermore US stock levels – at 458 million barrels – are at record highs. The dollar plays an important role in pricing oil – a strong greenback will result in reduced demand for commodities, including oil, denoted in US$, with the opposite impact when the currency weakens.

An embarrassing week for Lufthansa’s CEO Casfar Spohr. The German airline has apparently joined three major American airlines in alleging that Emirates receives an unfair advantage with fictitious government subsidies. As a result, he thinks that this gives the Dubai operator an unfair advantage which could ultimately destroy its competitors and eliminate consumer choice. A day later, Lufthansa pilots began a 3-day strike action beginning Wednesday, and affecting the whole of the carrier’s schedule. Maybe Herr Spohr should put his own house in order first and stop blaming non-existent external factors for Lufthansa’s deficiencies. The Times They are A Changin’.

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