Austrian developer, Kleindienst is set to complete its St Petersburg project, part of the 300-island The World, by October 2016. This 3rd phase will comprise the 109-room Tzar Hotel and 40 ‘Floating Seahorses’ – floating villas including 269 sq ft of underwater glazing. This location will be the focal point of the developer’s Heart of Europe resort including adjacent islands – Germany, Monaco, Sweden and Switzerland. The first two phases, encompassing 51 similar villas, have already been sold out, with the first scheduled for handover next month.
A Saudi / Qatari US$ 545 million venture on Palm Jumeirah sees the Al Sharq Group and Al Mana Global development including a ‘W’ hotel and 104 Alef luxury apartments, with prices ranging between US$ 3.3 million and US$ 13.6 million. The project, covering 46.8k sq mt and with a 475 mt beachfront, will be ready within 18 months and is already 30% complete.
The first of three Starwood properties being built on the old Metropolitan Hotel SZR site is opening on Friday. The 358-room W in Q1 and the larger 1k-room Westin will join the 234-key St Regis Dubai, including 54 suites and the US$ 33k per night Royal Suite, by the end of June 2016. The Khalaf Al Habtoor hotel group will also see a fourth Starwood property by the end of next year – St Regis Dubai Al Habtoor Polo Resort.
Dubai-based and much-troubled builder Arabtec is hoping to win a contract for 13k housing units in Egypt; this figure is a long way off from the 1 million it was expecting to build earlier in the year. The contractor, 36%-owned by Aabar, has seen its share value plummet 85% over the past 18 months, whilst its annual losses to 30 September hve broached US$ 561 million.
Next month, Emirates will introduce its two class A380 and, with the absence of first class, its capacity will rise to 615 passengers – well above Air France; that airline has the current highest configuration for an A380 with 538 seats. The initial routes to be used will be Bangkok, Copenhagen and Kuala Lumpur.
The RTA will spend US$ 59 million in upgrading internal roads at Nad Al Sheba 4 and Al Khawaneej 2 that should be completed by early 2017. This is part of the authority’s 5-year, US$ 282 million plan to improve road infrastructure in a number of Dubai residential districts. It has already spent US$ 150 million for work in 13 different areas.
Drake & Scull, 12.8% owned by Emirates Investment Bank, made a Q3 loss of US$ 268 million, compared to a small US$ 3 million profit last year. The main driver behind this setback was the increase in impairment provisions.
The Jassim Al Ali Group has acquired the daily deals site, Nail the Deal, from Cosmos Group for an undisclosed sum. This is another indicator of the rude health of Dubai-based e-commerce sites, with the sector attracting both local and overseas investment activity and interest.
DP World’s BBB- issuer default rating agency has been raised by Fitch from stable to positive, based on improved cash flows (although still negative because of increased capex) and acquisition completions for Fairview Container Terminal and EZ World. With a 9% share of the global market, the company is the 4th largest container operator in the world and expects to improve this position by capex spending US$ 5.3 billion over the next three years.
It is estimated that UAE expats remit over US$ 30 billion every year to their home countries, with India being the main beneficiary accounting for more than 40% of that total. The cost of remittances can be as high as 10% but the UAE is one of the lowest countries at under 3%. This figure is set to grow, as the population forecast is a further 20% ahead of Expo 2020.
This population growth – along with increased tourism and rising incomes – are the main factors behind Knight Frank’s latest finding that the local retail sector has a healthy future. Its UAE Retail Focus Autumn 2015 report noted that there is a move towards local community centres which now account for 12% of total retail supply space. However, with recent expansions to the Mall of the Emirates and Dubai Mall, along with the planned 80 million sq ft Mall of the World, the mega centres still dominate the sector.
A new Deloitte report has estimated that Dubai receives a US$ 670 million economic benefit from sport-related events, with a spend of nearly US$ 1.8 billion. Of this total, 40% is spent on the emirate’s “magnificent 7” – Dubai Rugby 7s, Dubai World Cup, Dubai Marathon, Dubai Desert Classic, DP World Tournament, Dubai Duty Free Tennis and the Dubai Tour (cycling). 14.0% of the total is spent on facilities and 9.8% on the14.5k employed in the sector.
Dubai’s October inflation rate eased to 3.3%, helped by a fall in transport costs to 1.2% (from 5.5% in September) and housing by 0.4%; however, according to latest UBS Prices and Earnings study, housing remains a major cost driver with Dubai rated the 4th most expensive city in the world (after Geneva, Zurich and New York).
As noted in a recent blog, banks are taking a major hit from absconding owners of failed SMEs. It has been estimated that, so far this year, US$ 1.4 billion could be the potential impairment, as the low oil prices and declining liquidity take traction. Even at this total, it is less than 0.4% of the banks’ total outstanding debt balance of US$ 381.4 billion. It is a Catch 22 for the financial institutions because SMEs form a major client base sector, accounting for 60% of the UAE’s GDP.
With an investment group, led by Al Ramz Capital, acquiring 82.4% of the shares in Dubai Development Company, the company resumed trading on the DFM on Thursday. With 10 million shares, DDC has a market value of US$ 12.4 million at US$ 1.24 per share.
The DFM opened the week at 3265 and, after a disastrous Sunday, managed to close 8 points up at 3273 by Thursday (19 November). Of the bellwether stocks, Emaar Properties lost US$ 0.06 to US$ 1.68, whilst Arabtec crept up US$ 0.01 to US$ 0.33. Trading volumes on Thursday were down and still comparatively weak, at only 219 million shares, valued at US$ 91 million changing hands, (cf 264 million shares for US$ 87 million, the previous Thursday).
After a month of falling prices, it was a flat week for both oil and gold – by Thursday (19 November), Brent crude was up US$ 0.12 to US$ 44.18, whilst gold dipped US$ 4 to US$ 1,077.
There was disappointing news for those hoping that the price of oil – which has more than halved over the past 18 months – would increase in the short-term. According to the International Energy Agency, oil stock piles have reached 3 billion barrels – an all-time high. Although daily demand has risen 2 million barrels over the past five years, supply is not in equilibrium, since OPEC has failed to cut quotas and US production of shale oil has risen. Consequently, with a slowdown in global growth, demand will inevitably decrease – and even if the US shale producers close operations, there will be continued downward pressure on prices.
Australian explosives maker, Orica managed to turn an annual 2014 profit of US$ 436 million to a loss of US$ 917 million this year because of a massive US$ 1.22 billion write down. Its 1% reduction in revenue to US$ 4.1 billion has been attributed to lower Australian ammonium nitrate volumes aligned with reduced demand.
Springleaf, the second largest personal loan provider in the US, is set to acquire OneMain from its parent company Citigroup for a reported US$ 4.25 billion. Following approval from the Department of Justice and state regulators, the new entity will have 1.8k branches, dealing mainly with low cost loans under US$ 6k.
Intercontinental Hotels, with 5k hotels, will lose their number 1 spot as Marriott International has agreed to buy Starwood Hotels for US$ 12.2 billion. The new entity will boast 5.5k properties and its 1.1 million rooms will generate US$ 2.7 billion in revenue. Only US$ 300 million cash will change hands, as the rest of the deal will be equity financed.
In the UK grocery sector, German discount supermarket chains, Aldi and Lidl, now hold 10% of the market segment, as the likes of Tesco Morrisons and Asda see revenue continuing to fall by 2.5%, 1.7% and 3.5% respectively. The two relative newcomers have doubled their market share over the past 3 years. To add insult to injury, Lidl has become the “official supermarket” to England FC – along with Wales and Scotland – in multi-million dollar deals.
The UK government is to sell US$ 19.8 billion worth of the former Northern Rock mortgages to investment firm Cerberus. Following this sale, which values the asset at US$ 426 million above its current book value, the UK government has managed to sell 85% of assets of the Newcastle-based lender which collapsed in 2007, but was then bailed out by taxpayers.
The world’s 3rd biggest economy fell back into recession in Q3 for the 4th time since the GFC. Japan recorded a 0.8% contraction on an annualised basis – after a 0.7% fall the previous quarter. There is the urgent need for the government to take action to boost the flagging economy, as business spending fell 1.3%.
The Chinese Yuan’s rise as a global currency took another step forward with news that it will join the IMF’s basket of reserve currencies, having met its criteria of being “freely available” and “widely used”.
The weekend’s G20 meeting in Turkey was overshadowed by terrorist attacks in both Beirut and Paris. However the 2-day meeting did pledge to use all available policy tools to address uneven economic growth and to endorse the “BEPS” measures to overhaul the global tax system.
Eurozone Q3 economic growth slowed from 0.4% to 0.3%, probably signifying the extension of the QE programme by the end of the year. Whilst Germany and France recorded 0.3% growth, the other two main economies – Spain and Italy – saw figures of 0.8% and 0.2% respectively. Portugal, Greece and Finland fared even worse at 0%, minus 0.5% and minus 0.6%. The most recent data indicates the eurozone inflation rate at zero – some way off the target of 2.0%!
Since January, the ECB has pumped in US$ 64 billion monthly and is committed to continue the same until next September all in a bid to boost growth and avoid deflation. On both counts this has not worked and hence the need for further monetary action.
Following recent strong employment figures, if the US Fed wanted a further sign that a December interest hike is on the cards, it came with a rise in the country’s October consumer prices by 0.2%, with the core CPI up 1.9% on the year.
This could be yet another case of the all too cosy relationship between government and big business. The executives, who ran HBOS into the ground in 2006, will not face prosecution because of the six-year statute of limitations. It has taken banking regulators so long that their report into the financial institution’s demise will see senior management escaping any financial penalties. As the UK’s biggest mortgage lender collapsed, taxpayers – in a US$ 31 billion capital injection into Lloyds TSB – bailed it out. It will be interesting to hear why the enquiry took so long! It is heartening to read that ex-Chief Executive James Crosby subsequently relinquished his knighthood and took a cut in his US$ 880k annual pension. Halleluiah!