Throw It All Away!

obama-cameronJLL reported that house prices have fallen 10% over the past 12 months but indicate that the market may now be returning into positive territory. Over the past quarter, rents for apartments dropped by 3%, whilst villas have remained flat in Q1, and down 5% over the past year. The consultancy estimates that 2.2k units were handed over in Q1 with a further 27k expected over the next 9 months – we will have to wait and see!

Already with four active projects, and ten others in the pipeline, Ellington Properties has announced plans to build 10k residential units by 2020. The developer expects its 181-unit Belgravia project in JVC to be completed by year-end, whilst work on three others is under way. These are a 17-storey tower, DT1, in Downtown, the Ellington Collection of luxury villas on Palm Jumeirah and Belgravia II in JVC.

Hotel operator Rotana is expanding operations, ahead of Expo 2020, with plans to add two properties in Dubai – the 600-key Wafi Rotana and a 400-room hotel on SZR, along with 200 serviced apartments and 400 residential units.

Azizi Developments is another company to move into the hospitality sector with two towers – Candace Aster and Candace Acacia – to be managed by Candace Hotel and Resorts. Work on the US$ 125 million project, located in Al Furjan, has already started and, on completion in Q3 2017, will add 460 units to the ever growing serviced apartment sector.

Hilton Worldwide has announced that a management agreement has been signed with Ward Holdings to open the Waldorf Astoria Dubai International Financial Centre. The property is slated for completion by Q4 2017.

Louvre Hotels Group is planning to expand its 60-property MENA operations by adding a further 40 budget hotels to its portfolio. The French company has several brands including Golden Tulip (4-star) and Royal Tulip (5-star) but will be focusing on the lower segment, with its Première Classe and Campanile products.

Because of a trademark infringement, Danube Properties has had to amend the name of its latest US$ 82 million Ritz Tower by Danube to Starz Tower by Danube.

With three new theme parks – Bollywood, Legoland and Motiongate – set to open this October, Dubai Parks & Resorts has announced plans for a 4th – Six Flags. Meraas Holding owns 60% of the Dubai-listed company which is proposing a US$ 458 million rights issue to finance the new venture, with 1.68 billion shares of US$ 0.272, on offer; on Thursday, these were trading at US$ 0.376. Current shareholders will be entitled to 1 new share for every 3.767 held.

Majid Al Futtaim has signed a JV with international fashion retailer, Monsoon Accessorize, to expand in the GCC. The London-based entity – comprising two brands, Monsoon founded in 1973, and Accessorize – has 1k stores in 70 countries and will take advantage of MAF’s regional experience.

Damac Properties announced a 15% cash dividend, as both its revenue and net profit jumped – the former doubled to US$ 2.32 billion and the latter by 29.6% to US$ 1.23 billion.

Amanat Holdings has paid US$ 38 million to acquire a 16% share in Madaares, a Dubai education provider, with six schools, having 6.9k students, and 4 nurseries. It is estimated that over the next five years, the private education sector will witness annual growth of 9%. The company also declared a 1.5% cash dividend, following last week’s announcement that, in its first year of operations, it posted a US$ 14 million profit.

Another company on the acquisition trail is Arcapita, spending US$ 100 million on a Dubai 630k sq ft logistics park in Al Quoz. The investment management firm is planning to lease out all 10 premium warehousing facilities to a large company, ensuring a future steady recurring investment income; this will also see attractive capital appreciation, if the 20% increase over the past 20 months continues.

Moss Bros, founded in 1851, is to open its first overseas store in Ibn Battuta later in the month. The UK plc, with over 150 UK outlets, specialises in men’s dress wear for formal occasions.

Earlier in the week, the world’s first 7-star VIP private air terminal had its inaugural flight. An Embraer Legacy aircraft, with 13 Maldives-bound passengers, took off from the 5.6k sq mt terminal at Dubai South’s Aviation District. Solely for private use, the facility will operate 24 hours every day.

After four years in the position, Alan Liebman has stepped down as CEO of Kerzner International Holdings; last April the Investment Corporation of Dubai acquired a significant equity interest in the company, with Mohammed Al Shaibani taking over as Chairman from the founder, Sol Kerzner. At that time, Istithmar World paid US$ 250 million to buy out the remaining 50% in Dubai Atlantis hotel.

Forbes’ latest report sees six local businessmen make their billionaire ranking. These include Majid Al Futtaim (US$ 5.0 billion), Abdulla bin Ahmad Al Ghurair and family (US$ 4.9 billion), Hussain Sajwani (US$ 3.2 billion), Abdulla Al Futtaim (US$ 3.1 billion), Saif Al Ghurair and family (US$ 2.2 billion) and Abdul Wahid Al Rostamani (US$ 1.3 billion).

Over the next decade the Abdulla al-Ghurair Foundation for Education will provide 15k scholarships for MENA students in need of financial assistance. Launched by Abdul Aziz al-Ghurair, the fund will use US$ 1.14 billion for education grants, in a bid to ensure that every Arab youth has the means to a tertiary education. Last year, the Emirati billionaire businessman pledged to donate 33% of the family business assets over the coming years to charity. (In 1967, his father – Abdullah Al Ghurair – started the country’s oldest commercial and largest private bank – now known as Mashreq – and three years earlier had opened its first boarding school in Masafi).

(The latest philanthropic billionaire is Pony Ma, the Chinese founder of Tencent Holdings Ltd. He is reportedly donating over 11% of his US$ 18.8 billion fortune to his charity foundation by dint of 100 million company shares, currently valued at US$ 2.1 billion).

Three years after exiting the Russian market, and following this January’s agreement to invest US$ 2 billion with the Russian Direct Investment Fund, DP World Russia is now studying suitable locations. The JV, 80% owned by the Dubai partner, is considering potential investments in Vladivostok, the Baltic and the Black Sea.

With just over two months to go before mandatory health insurance for all Dubai employees becomes reality, a reported 25% of employees are still not covered.

Humaid Al-Qatami, the chairman and director-general of Dubai Health Authority, has indicated that the emirate is planning to open 22 new healthcare centres (18 private and 4 public) in the coming five years. These form part of Dubai Health Strategy 2021 to improve the quality and cost effectiveness of local health services as well as to boost medical tourism, with expectations of numbers increasing from the 2014 level of 135k to 500k by 2020.

Q1 traffic on the Metro and Dubai Tram continued to grow, with reported 49.9 million and 1.3 million users respectively.

The world’s largest district cooling services provider, Emirates Central Cooling Systems Corporation, will add a further 30k refrigeration tonnes to its capacity. Empower currently operates more than 1 million 100 thousands RT and provides over 70% of Dubai’s district cooling market.

There was a slight 0.08% rise in Dubai’s year on year March inflation rate to 1.51% but still well down on the 4% level seen in early 2015. It is expected that the downward trend will continue in the short-term, as housing and utility charges will weaken.

Emirates NBD was one of the first major local companies out with Q1 results posting an 8.4% hike in profits to US$ 493 million. The bank, 55.6% owned by Investment Corporation of Dubai, was helped by a 24.6% reduction in its bad debts provision to US$ 226 million. In the past month, the bank has made 300 staff redundant in a bid to cut costs. Both deposits, as well as loans and advances, rose by 12% to US$ 79.3 billion and US$ 76.0 billion respectively.

CBD’s Q1 profit disappointed, with a 0.8% fall in revenue to US$ 157 million and profit by 18.3% to US$ 66 million; operating expenses jumped 8.3% to US$ US$ 57 million, as impairment allowances rose 35% to US$ 37 million. Total assets surged 21.6% to US$ 16.1 billion, with loans and advances up 15.9% to US$ 10.6 billion.

Nakheel recorded an 8.0% jump in Q1 profits to US$ 401 million as its hospitality, residential and retail sectors have expanded, resulting in improved rental returns. The major impact has come with the February opening of Dragon Mart 2, effectively doubling its size to 2.2 million sq ft.

Deyaar Developments reported a 7.6% fall in Q1 profit to US$ 14 million.

Dubai Islamic Bank (DIB) said it has listed $500 million (Dh1.836 billion) of sukuk on Nasdaq Dubai, bringing the bank’s total listing on the bourse to $3.25 billion.

Now that the final dissenting creditor, Stonehill Capital Management, has sold its US$ 15 million debt to DIB, an existing stakeholder, Limitless should be able to finalise its US$ 1.2 billion debt restructuring. If all parties agree, this will include extending the debt timeline to December 2018 and the Dubai-based property developer making an advance payment of US$ 518 million to the banks and US$ 48 million to trade creditors.

Dubai-listed Gulf Navigation is aiming to repay its outstanding debts of US$ 35 million, as it undergoes a new strategy, including a cost cutting exercise and an expansion of services as well as a US$ 60 million convertible bond programme. Two shareholders – Diamond Line General Trading and Tabarak Constructions – have recently increased their shareholdings to 8.55% and 10.35% respectively.

The UAE Central Bank reported that, as the demand for business loans has increased, banks are increasingly reluctant to meet it– probably in light of the economic environment and a rise in debt defaults. This is a problem that needs addressing as SMEs are the lifeblood of the economy but if finance becomes unavailable – or only at exorbitant rates – then growth will be held back.

After its first 15 years, based in the World Trade Centre, the DFM is to build a tailor-made office in Business Bay on a 10.2k sq mt plot valued at US$ 63 million. The new bourse is expected to be ready for business by 2015.

The exchange opened on Sunday at 3547 and nudged 37 points higher to close on 3584 by Thursday (21 April 2016). Bellwether stocks, Emaar Properties and Arabtec, had a mixed week with the former up US$ 0.04 at US$ 1.88, and the latter again unchanged at US$ 0.47. Trading volumes on Thursday were at 825 million shares, valued at US$ 285 million, changing hands, (cf 554 million shares for US$ 257 million, the previous Thursday).

Brent crude had another good week – jumping 4.0% (US$ 1.68) to US$ 43.18 – whilst gold rose US$ 24 to US$ 1,250 by Thursday (21 April) close.

In the first meeting of its kind in 15 years, 16 major oil producers (both OPEC members and others) failed to reach any agreement in Doha on Sunday. It was hoped that some sort of compromise on production quotas could be reached but no deal was attained. OPEC members are set to meet again to try and thrash out some sort of compromise that would be agreeable to all parties, including Saudi Arabia and Iran.

Following on from Hyundai’s 2014 falsification, and the VW scandal last year, Mitsubishi has admitted that it has falsified fuel economy data on 600k vehicles sold in Japan; this includes 470k units it made for Nissan. The Korean company has already settled a US$ 350 million penalty payment with US regulators, whilst VW has set aside almost US$ 7.0 billion to cover costs. This week it reached a deal with US lawmakers that saw every affected customer receiving a US$ 5k compensation payment. along with the carmaker having to fix nearly 600k vehicles at their expense.

An international consortium, including Brookfield, CVC Capital Partners and the Qatar Investment Authority (which has a 25% stake holding), has reportedly cancelled proposals to acquire the UK’s second largest supermarket chain, J Sainsbury. It seems that the US$ 8.6 billion takeover plan was aborted after the supermarket made a US$ 2.0 billion offer for Home Retail Group, the owner of Argos.

Yahoo reported disappointing Q1 results, with revenue down 11.6% to US$ 1.08 billion and a loss of US$ 99 million. The struggling company is looking for buyers for its core internet sector and potential suitors include UK’s Daily Mail, TGP, Verizon and YP Holdings; earlier plans to sell to Alibaba fell through.

Another US tech company facing problems is Intel which has set aside a US$ 1.2 billion charge to cover restructuring costs, as it plans to shed 12k from its payroll, equivalent to 11% of its work force. With global PC shipments falling 11.5% in Q1, the company is trying to move away from this declining sector into the higher-margin data centre business.

The board of Lexmark has agreed to be taken over by an Asian consortium for a reported US$ 3.6 billion, subject to shareholders’ and regulatory approval. Chinese-based Apex Technology, maker and distributor of ink jet and laser cartridge components, is the lead company in the acquisition that also includes PAG Asia Capital and Legend Capital of China.

Last week, the three largest US financial institutions, JP Morgan, Bank of America and Wells Fargo, posted disappointing Q1 results. Now its 4th biggest bank, Citigroup, has reported a 27.1% plunge in quarterly profits to US$ 3.5 billion, as both its fixed income markets and investment banking revenue dipped – by 11.5% to US$ 3.1 billion and 27.2% to US$ 875 million respectively.

With the EPL coming to its year end climax, Deloittes reported that its 20 clubs made a total pre-tax profit of US$ 170 million in the 2014-2015 season – 36.9% down on the previous season. The clubs received US$ 4.9 billion from broadcast rights, due to rise by US$ 2.4 billion next year; this has helped pay the league’s massive US$ 8.6 billion wage bill.

The IMF has warned that Greece’s growth plans are unrealistic and doubted whether the country could meet its forecast 3.5% budget surplus. It still has unemployment levels at over 25% and is in urgent need of major structural reforms, especially in the area of tax reform. It is estimated that tax collection rates are dropping and that 5% of Greek households are exempt from tax – compared to say Portugal where the figure is only 2%.

Indian tax collection is only slightly better, with just under 6% of earning individuals paying tax and its 16.6% tax to GDP ratio is one of the lowest globally. It is estimated that the uncollected outstanding tax could be a staggering US$ 117 billion – six times higher than the figure in 2010. Any modicum of success in collection could help the government’s target of reducing its fiscal deficit from 3.9% to 3.5%.

Having cut its global growth forecast last week, the IMF met with representatives of the 25 largest economies in an attempt to boost the flagging world economy. Some of the issues discussed included certain countries weakening their currencies to gain more competitive export prices along with the needs to boost public spending and avoid continuous deflation.

As the world experiences a global steel glut, China reports a record month in March with a 70.7 million tonne output and exports up 30.0% to 10 million tonnes. Meanwhile, an OECD meeting, with trade officials from 30 affected countries, could not come to any agreement on how to tackle the overcapacity problem facing the industry, whilst the US indicated that the problem lay with China and their need to cut back or face international trade sanctions. It is estimated that the annual global capacity is 2.37 million tonnes but 2015 usage continues to fall – from 70.9% to 67.5%.

George Osborne fell US$ 2.6 billion short on his target to keep annual government borrowing below US$ 106.6 billion. Public sector net debt at 83.5% to GDP remains relatively high, having risen 3.1% over the year to US$ 2,296 billion.

Ahead of its June Brexit poll, there were mixed economic signals from March data points. Month on month retail sales figures dipped 1.3%, despite Easter falling late in the month – sure signs that economic activity is dipping and low inflation is here to stay for most of this year. Latest unemployment figures show a slight 21k increase in unemployment levels to 1.7 million, as the rate remains steady at 5.1% – but down from 5.6%, year on year. Earnings, at 1.8%, slowed from the 2.1% posted in the previous quarter, indicating a slowdown in the labour market.

The Cameron government has called in the big guns – including the US president, the IMF chief executive, the German Chancellor and the Treasury – in a bid to ensure that the UK stays with the EU. From the outside, it very much looks like the fear card is being played remorselessly. To anybody who does not understand why there is growing dissent against the European bureaucracy and a possibility that the country will vote for exit, the following may help.

Pythagoras’ theorem – 24 words
Lord’s Prayer – 66 words
Archimedes’ Principle – 67 words
10 Commandments – 179 words
Gettysburg address – 286 words
US Declaration of Independence – 1,300 words
US Constitution with all 27 Amendments – 7,818 words
EU regulations on the sale of cabbage – 26,911 words

Maybe it is time to Throw It All Away!

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