We Are Family

dubai-base-jump-towerFast becoming known as an extreme sports location, there are reports that the emirate will soon see a 325 mt base-jump tower. At its lower levels, the building will house an activity plaza, catering for family actions. The mid-levels will be for the more adventurous with external abseiling and climbing opportunities, along with climbing walls, free fall facilities, base jumping and assisted high diving. The top level will see the opportunity for climbers to experience replicating various ice climbs, including Everest.

After acquiring land, overlooking the Dubai Canal, only last month, Damac have acted quickly, by announcing a limited release of hotel rooms in its Aykon City project; initial room pricing is in the region of US$ 272k. The 4 million sq ft development will comprise six towers, including the 80-storey Aykon Hotel and Residences – with the top ten floors housing the 280-key hotel.

Wasl Properties has completed its 170k sq ft Karama wasl hub project comprising 312 apartments, 70 retail outlets and 32 eating establishments. Over the past 7 years, the developer has completed 12 projects, with 3.6k residential units, in Karama and Muhaisnah.

With 13 Dubai properties, covering 2.6k keys, hotel group Carlson Rezidor is due to open its first brand Radisson RED in Dubai Silicon Oasis. The 171-key hotel will open in Q2 2018.

It seems that property prices have begun to stabilise and are showing signs of a long-awaited recovery. The latest ValuStrat report indicates that prices in the 8 months to February 2016 hardly moved, with upward movements noted in the middle-end segment locations such as IMPZ, Motor City and The Greens. Compared to its base position of 100 in January 2014, the ValuStrat Price Index stood at 98 last month.

According to Core Savills’ latest Dubai Office Market report, the emirate’s office supply runs at 8.4 million sq mt, of which the prime areas – DIC, DIFC, DMC, Downtown and SZR – account for 28% of the total. The bulk of the portfolio – 51% – is in the secondary sector comprising Bur Dubai, Business Bay, Deira, DHC, JLT and Tecom. Supply growth in these two sectors was estimated at 5% last year, which will increase by 7% in 2016, with much of the activity found in Business Bay, as 318k sq mt of office space was added last year.

More than 27k visitors attended this week’s Taste of Dubai festival – a record number for the 3-day event.

In order to finance on-going infrastructure projects, Meydan Group has signed a US$ 477 million package with Commercial Bank International and Qatar National Bank. It is also reported that state-backed Meraas Holding LLC has arranged a 10-year US$ 381 million loan, which equates to about 50% of the total value of its Marsa Al Seef project on the Creek.

Limitless LLC’s attempt, at a second restructure of its US$ 1.2 billion debt, has reached an impasse. Needing all of its creditors to agree to the new terms, it seems that 98% have but Stonehill Capital, with US$ 15 million outstanding, has not. The company is expected to source funds from land sales – US$ 517 million has already been raised from selling half of its land bank in Saudi and the balance from receipts from similar sales in Jebel Ali.

Dubai Holding Commercial Operations Group has cancelled a US$ 354 million tender to repurchase part of a 2017 6% bond issue, as the pricing offered by security holders was higher than at what the company was prepared to settle.

Big Brands, the Dubai luxury goods retailer, is planning to invest US$ 27 million, to add a further 40 outlets in the country. Currently, the company has 10 shops employing 130 staff and, with the announced addition, will require a further 500 on its payroll.

Parking at 23k of the 130k total meters in Dubai has become more expensive, with hourly parking rates doubling to US$ 1.09 and 4-hour rates up 45% to US$ 4.36. Furthermore, the usage of meters will run for 14 hours (8am – 10pm), rather than the current 10 hours.

Dubai International Airport had its best ever month in January with passenger numbers topping 7.3 million – 6.3% higher than a year earlier. If this upward trend continues, the airport could reach 85 million passengers by year end. With aircraft movements up 3.7%, cargo traffic increased by 8.2% to 201k tonnes – and this despite the new Al Maktoum airport taking on more freight.

Following the NYE fire at The Address hotel, and more stringent building codes, Alubond USA has started manufacturing fire-resistant cladding. According to the Sharjah-based supplier, there are at least 1k buildings in the country, where the panels used are made of aluminium filled with highly flammable low-density polythene. Such structures are high risk, with the possibility of the rapid spreading of flames, as seen in the Downtown incident.

The lure of Dubai attracted 22k new SMEs last year – an 18.0% hike on 2014. The emirate has many advantages for such business units but one nagging problem is the banks. It seems to be very difficult in today’s tough environment for SMEs to obtain facilities and when they can, some financial institutions are charging rates upwards of 20% – a possible death knell for many start-ups, as well as a potential loss for Dubai’s economy.

Dubai Investments, 11.5% owned by the Investment Corp of Dubai, has announced a 12% cash dividend – the same as last year, although then it also issued a 6% bonus issue of shares.

As transportation costs continue to decline, down 6.6% year on year, it was no surprise to see Dubai’s February inflation rate drop again from January’s 1.91% to 1.43%. This time last year, the rate was over 4%.

Dubai-listed Amanat Holdings reported a US$ 14 million profit for its first 14 months of operation ending 31 December 2015.The healthcare and education company made two major investments during the year – US$ 53 million for a 35% shareholding in Saudi’s Sukoon International and US$ 68 million for a 4% stake in Al Noor Hospitals.

There were encouraging numbers from DP World with 2015 revenue and profit both up – by 16.4% to US$ 3.97 billion and 30.8% to US$ 883 million respectively. Consequently, the port operator increased its dividend payout by 12.8% to US$ 0.30.

The bourse continued its bullish run, opening Sunday at 3355 and rose 30 points to 3385 by Thursday (17 March 2016). Bellwether stocks, Emaar Properties and Arabtec, had mixed fortunes – the former up by US$ 0.05 to US$ 1.71, with the latter down US$ 0.03 to US$ 0.44. Trading volumes on Thursday were well down on last week at 410 million shares, valued at US$ 257 million, changing hands, (cf 795 million shares for US$ 141 million, the previous Thursday).

Brent crude again confounded the doomsayers by jumping a further 2.5% (US$ 2.98) to US$ 41.50, whilst gold was down US$ 8 to US$ 1,265, by Thursday (17 March) close.

After two failed attempts over the past decade, there has finally been a US$ 30.4 billion merger agreement between Europe’s two major stock exchanges – LSE and Deutsche Boerse. The new group arrangement, which will be 54% German owned, is to be finalised by the end of the year, with headquarters in both London and Frankfurt.

Vijay Mallya is presently living in London but has tweeted that he has not absconded his home country, despite creditors appealing to the Indian Supreme Court for over US$ 1.4 billion in unpaid accounts. The Indian MP – and also a stakeholder in F1 team Force India – sold a major share in his family’s drinks company, United Spirits, to Diageo last year and was due to receive a US$ 75 million pay-out, after being ousted from the company last month.

Following a plethora of legal actions in the US, 278 global investors have joined forces to bring a US$ 3.7 million suit against Volkswagen AG in Germany, for their failure to publish timely information about the emissions scandal.

Canadian pharmaceutical company, Valeant, saw its shares fall 51% this week, as it missed its revenue forecast and recorded a Q4 loss of US$ 337 million. Last month, it announced a delay in its annual report so as to consider internal accounting practices and confirmed that it would resubmit financial statements for the past two years. After several recent acquisitions, the company is carrying US$ 30 billion of debt on its balance sheet.

Having sold most of its North American business to asset management firm company Cerberus last year, the cosmetics company Avon is planning to move its head office from New York to London. This was part of the strategy to improve the 130-year old company’s sales that would also see its payroll number cut by 8.8% to 25.8k.

Far from being the fait accompli it seemed earlier in the year, Marriott International Inc’s offer – valued at US$ 65 per share – for Starwood Hotels & Resorts Worldwide Inc has apparently been gazumped. It seems that a Chinese consortium, including Anbang Insurance Group, is prepared to offer cash equating to US$ 76 per share; this values Starwood, which includes St Regis, W and Westin, at US$ 12.9 billion.

Anbang has also bought Strategic Hotels Resorts (which has 16 luxury resorts and hotels in the US) from Blackstone for a reported US$ 6.5 billion. The US private equity firm only acquired the hotel group in December 2015, for a reported US$ 3.9 billion (or about US$ 6 billion including debt).

Hackers, suspected to be Chinese, have had a field day in Bangladesh, resulting in the central bank’s governor resigning this week. They have managed to steal US$ 101 million, 80% of which found its way to four private accounts at a branch of the Rizal Commercial Banking Corp in Manila, with the balance transferred to Sri Lanka.

An official audit has found that the Nigerian National Petroleum Corporation has defrauded the government of US$ 16 billion in a suspected fraud.

There were two interesting regional stories this week. To reduce its budget deficit, slated to be US$ 40.7 billion (50% higher than the previous year), the Kuwait government has brought in a 10% corporate tax on profits; its introduction date is unknown. The cabinet is also considering cutting subsidies on food, fuel and utilities, as well as privatising some government assets, in a bid to increase its revenue stream.

Meanwhile, the Saudi government has reportedly ordered all ministries to cut their contracts’ spending by 5%, with immediate effect. This move will not be well received in most sectors that are being hit by weakening cash flows and rising costs – and it will lead to an inevitable fall in the Kingdom’s economic growth.

The Bank of Japan has refrained from introducing any further economic stimulus, as it waits for any signs of improvement from its January introduction of negative interest rates. This inactivity may point to the fact that the bank has already fired its “big bazooka” – with its massive QE strategy – and this has failed to stimulate the flagging economy.

On Monday, Egyptian authorities surprised the market with a 13.5% devaluation which saw the pound fall from 8.95 to 7.83 to the US$. In the short run, this will help both exports and tourism but the country’s prime problem is the lack of foreign reserves, which have halved over the past five years to US$ 16 billion. This is despite the fact that GCC countries have pumped in more than US$ 20 billion over that period.

As expected, the Fed kept rates on hold and, as a result, the S&P 500 has jumped nearly 12%, since hitting a new low on 11 February. Chairman Janet Yellen did indicate that there could be just two rate hikes this year, mindful of the drag factor emanating from sluggish global growth and its negative impact on the US economy. (A day later, the BoE also confirmed that rates would hold steady).

This week’s UK budget had one major surprise – a tax on sugary drinks that will raise US$ 750 million ostensibly to fight child obesity. Other key points in George Osborne’s last budget before the Brexit referendum, saw cuts in CGT, excluding residential property, an increase in personal allowance and raising of higher rate threshold and a US$ 1 billion upgrade for flood defences. Strangely, two education–related issues were included – compulsory maths lessons up to the age of 18 and all schools to become academies.

Not known for its success rate, the UK’s Serious Fraud Squad has closed the books on its forex investigation into banks’ manipulation due to “insufficient evidence”. Last May, five international banks, including Barclays and RBS, were fined US$ 5.3 billion by US authorities for rigging forex rates, having settled with UK and US regulators for more than US$ 3.2 billion in November 2014. (As a matter of interest, a Sky News report indicates that the government, which injected US$ 65.8 billion into the troubled RBS in 2008, may only recoup US$ 34.1 billion were it to dispose of its 73% stake).

Another example of the cosy relationship between government and big business reared its ugly head again – this time involving Lord Maude and Lord Deighton. After stepping down from his role as Trade Minister this week, the former will set up a consultancy to help foreign governments, with cutting their procurement budgets. The latter, another treasury minister, has just been reportedly appointed chairman of Heathrow – at a time when the government is deciding whether to approve a third runway. A new twist on We Are Family!

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