Free Fallin’

tiger-woods-dubaiTomorrow (Friday), Emirates will award a massive engine order for fifty of its Airbus 380s to Rolls Royce, in a deal estimated to be worth in the region of US$ 9.2 billion. That being the case, it will be a massive blow to its current supplier, GE-Pratt Whitney, whose GP7200s are to be found on all its 59 380s currently in use.

HH Sheikh Mohammed bin Rashid Al Maktoum has approved the 2020 Masar Project – an expansion of the Red Line to link with the 2020 Expo site. Starting from the Harbour & Tower terminus, seven new stations and 15km of track, 4km of which will be underground, will be added.

Arabtec will be looking for a new chairman since the current incumbent, Khadem Al Qubaisi, has not been listed on board nominees for upcoming shareholders’ approval. Also missing from the listing is Riad Kamal who founded the company forty years ago and who had resigned as chief executive in February 2013.

Any confusion relating to the future of Mohammed Alabbar’s position as chairman of Emaar Properties was laid to rest as he was re-elected at this week’s AGM. There had been concern that his non-executive positionss with other companies such as Capital City Partners, Eagle Hills and Tradewinds Corporation could be an obstacle to his carrying out his Emaar role. He did disclose that the company had a 235 million sq mt land bank – more than enough for development “for decades to come”. The AGM also approved a US$ 292 million interim dividend payment equivalent to US$ 0.041 per share.

A surprising revelation from Nakheel was that 7.8% of the 9k homes it has built in Dubai have not been claimed by their owners and the government developer has no idea of their current whereabouts.

As already announced, Nakheel is planning to extend the largest overseas Chinese trading hub outside of its mainland. Dragon City will see an expansion, comprising 2.2 million sq ft of retail, 1.3 million sq ft of commercial, 1,120 residential units and a 250-key hotel. On completion, the development will cover an area in excess of 11 million sq ft.

Saudi company, Binladin Contracting Group has been awarded the deep service contract for the Town Square project, including the recently launched Zahra and Hayat Townhouse developments. Nshama is the developer of the mega project encompassing 750 acres, including a 2.5 million sq ft retail area for 600 shops. Meanwhile Al Naboodah Contracting has won a US$ 6.0 million contract for grading works covering the whole project.

Despite marginal Q1 falls in villa prices (1%) and apartments (2%), JLL is still predicting a 10% drop for the year. According to the property company, only 730 residential units were delivered in Q1 with a further 22k due over the next nine months to bring Dubai’s total residential inventory to 401k The office sector is still a problem although vacancy rates fell 3% to 23% in prime locations, as year-on-year rents rose 1% to US$ 512 per sq mt.

LuxHabitat estimates that almost 20% of Dubai’s upmarket residences are normally vacant as overseas owners only use them for holiday homes or just as investment vehicles.

Mövenpick plan to increase its Dubai portfolio to eight with this week’s announcement of a 251-room property in Dubai Media City, following an earlier report of a 246-key hotel in Downtown; both are due to open in 2017.

Almost seven years after receiving payments of US$ 55 million for a golf course that did not materialise, Tiger Woods has reportedly designed a new course at the same location. Damac is developing the Trump World Golf Club which will be the focal point of its 1.5k home-Akoya Oxygen project. The golfer’s design plans will be released in Q2, once tenders have been issued.

A new law will ensure that all found property must be handed in to police within 48 hours – and that finders will be entitled to the lower of US$ 13.6k or 10% of the value of the property.

Another law saw the establishment of the Mohammed bin Rashid Fund for SMEs, with assets totalling US$ 163 million. Two types of funding will be made to Emirati entrepreneurs between the ages of 21 – 65. The Seed Capital Loan will allow direct payments of between US$ 13.6k – US$ 136k whilst the Credit Scheme Loan acts as a guarantor for both start-ups and existing businesses requiring between US$ 136k and US$ 1.36 million. 

The UAE Ministry of Labour reported that the country’s 2014 employment rate rose by about 10% to 4.4 million. Of that total, labourers accounted for 34.0% (1.5 million), the business sector 23.8% (1.05 million) and industry 11.3% (500k). Last year, 1.21 million work permits were issued and 821k terminated. 

Dubai’s inflation rate fell again in March to 4.0%, as a result of the strong greenback and lower global food prices which are at their lowest level in five years. Housing costs – at 7.5% higher than a year ago – are set to fall in 2015 which will see an inevitable dip in the emirate’s inflation but the same cannot be assumed for education expenses and their impact in 2015 remains to be seen.

Although no revenue figures were available, Deyaar Development recorded a 6.0% rise in Q1 profit to US$ 15 million.

Tecom Investments, a unit of Dubai Holding, has closed a US$ 1.09 billion eight-year loan facility. The business park operator will use the funds for general corporate requirements and new developments.

The Investment Corporation of Dubai is back buying hotels with the recent purchase of the W Hotel in Washington DC, a majority stake in New York’s Mandarin Hotel and a minority share in the One & Only in Cape Town.

According to CBRE, the ME sovereign wealth funds cut their 2014 overseas real estate  investment by 33.0%, to US$ 5.84 billion, with the two main drivers being lower oil prices and property becoming over expensive in certain prime locations. Overall investment from all sources fell to US$ 14.1 billion with Qatar (US$ 4.87 billion – 34.5%), Saudi Arabia (US$ 2.30 billion – 16.3%) and UAE (US$ 1.63 billion – 11.6%) accounting for 62.4% of total ME investment. London, Paris and New York were the favoured locations with investments of US$ 4.42 billion, US$ 2.22 billion and US$ 1.35 billion respectively.  (Abu Dhabi holds the second largest SWF, with a value of US$ 771 billion, behind the US$ 817 billion held by the Norwegian Government Pension Fund).

Having already signed agreements, in Australia, Kenya, Singapore and the Southern District of New York, with their respective courts on mutual enforcement of legal decisions, the Dubai International Financial Centre is hoping for a similar Chinese deal.

The Dubai Financial Services Authority slapped a US$ 8.4 million fine on the local branch of Deutsche Bank AG for serious infringements. These included misleading the Authority and failures in internal control procedures.

Qatar has beaten Dubai to become the first ME country to host a yuan clearing and settlement facility in a recent deal with the People’s Bank of China. As 2015 trade with China is set to hit US$ 60 billion, it is inevitable that the UAE will soon follow suit with the DIFC opening a similar set-up with its biggest trading partner.

An agreement between Dubai’s Abraaj Group and Saudi’s TPG sees the two equity houses take a majority shareholding in Kudu, one of he Kingdom’s leading fast food chains. No financial details were made available.

Amlak shareholders have approved a plan for the Dubai-based sharia compliant mortgage lender to re-join the DFMI, six years after its delisting. Last August, the company – 45% owned by Emaar Properties – restructured its outstanding liabilities of US$ 2.7 billion.

Having gained 6.1% and 4.0% over the previous two weeks, the DFMI started trade on Sunday at 3774 and jumped an impressive 8.7% to close at 4080 on Thursday – up 8.11% on its January opening of 3774. Bellwether stocks, Emaar Properties and Arabtec, both rocketed by over 14% (US$ 0.27 and US$ 0.10) to close the week on US$ 2.22 and US$ 0.80 respectively. The last day’s trading saw volumes at 123.4 million shares, valued at US$ 583 million. 

As Nokia looks certain to acquire Alcatel-Lucent for more than US$ 13 billion, it was no surprise to see shares in the French telecommunications equipment maker fall 8.3% as its Finnish rival’s share price initially jumped more than 18%. If the purchase goes through, the new entity will overtake both Ericsson and Huawei as the biggest global player in the sector. 

The IMF has cut UAE’s 2015 growth forecast to 3.5% citing the main cause of the dramatic fall in oil prices since its last October report. Other factors include the weakening eurozone and political uncertainty in the region. Allied to this is the World Trade Organisation reducing its global trade growth from 4.0% to 3.3% which will again impact on the UAE’s economic performance. It is perhaps significant that this figure is only the second time since WW2 that growth has been so weak; the other time was between 1980 – 1984.

It seems that a US$ 20 billion bilateral oil for goods agreement will mean 500k bpd of Iranian oil being traded for Russian grain, equipment and construction materials. A more significant deal is on the cards after President Putin lifted a self-imposed 2010 ban on the delivery of a S-300 anti-missile rocket system to Iran and this could put Russia in pole position when international sanctions are lifted. 

More worrying economic data from China as March exports dropped by 15%, with import shipments at their lowest level in six years – and 12.7% down on the corresponding 2014 return. As global and domestic demand continues at a sluggish pace, the short-term outlook for the Chinese economy does not augur well.

Iron ore is probably the biggest loser as the result of the Chinese slowdown. S&P has slashed its 2015 price forecast by 30.8% to US$ 45 as the metal’s price has slumped 60% over the past twelve months.. Prices have not been helped by the fact that the world’s four biggest producers – BHP Billiton, Fortescue, Rio Tinto and Vale – continue to increase production to maintain export share.  Australia, for one, is hoping that prices do not keep on Free Fallin’!

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