The Last Thing On My Mind

According to the latest Phidar report, Dubai real estate prices and rents are set to fall on the back of six-year low sales of completed properties and increasing vacancy numbers – quoted “at 35%, in preferred communities sampled”. It also concluded that prices and rents have fallen over the past twelve months – villas being 10.2% down (with rents 4.9% off) and apartment prices flat but rents dropping 3.4%. The main drivers behind the dismal news were the oil price, job cuts and a booming supply of properties. (However some others report that new properties have only totalled 13.3k in H1 and 11.9k and 14.9k over the two previous years – hardly enough to swing the supply curve). More worryingly is the belief that Dubai residential market is overvalued “by around 15% to 20%”.

At the start of this week’s Cityscape Global, the Expo 2020 organisers unveiled their impressive legacy plan  – District 2020 will be a two million sq mt mixed use community including 65k sq mt for residential use and 135k sq mt earmarked for commercial use, with both Siemens and Accenture already signed up.  Following the former’s announcement, earlier in the year, that it would establish a global HQ for airports, cargo and ports logistics at the site, Dublin-based Accenture is the second major company set to open a digital hub in District 2020; the professional services company has already been appointed as Expo’s digital services premier partner and systems integrator.

Key features of Expo will be retained with emphasis on culture, education, entertainment, innovation and sustainability. The UAE Pavilion is set to be a museum, whilst the three thematic pavilions (Mobility, Opportunity and Sustainability), will become new cultural facilities and conference/exhibition centres. There is no doubt that the two pillars of their successful 2013 bid will become reality – an Expo that will amaze the world and building a lasting legacy that will offer a new alternative to urban living.

Cityscape Global is an exhibition that is a platform for Dubai developers and, despite Emaar’s absence, the event did not disappoint. There was a raft of new projects announced that will keep the construction sector busy and boost the local economy.

With a 2020 completion date for the 7k-apartment Royal Pearls project, developer Oriental Pearls has announced that 10% of phase 1 (1.6k apartments) has already been completed and is slated for a November 2019 handover. Located in the Meydan Master Development, the project will also include a community centre, surrounded by water, along with the usual accoutrements of retail, dining and leisure space.

MAG Property Development has announced a US$ 600 million community project based on wellness. Located next to Ras Al Khor Flamingo Wildlife Sanctuary, it will feature the world’s largest wellness centre at 120k sq ft. The gated community will also have 550 mt of Dubai Creek waterfront, along with a hotel. Newspaper reports indicate that MAG is also to launch a US$ 1.1 billion gated community in MBR City.

Nakheel has announced a 38-storey luxury beachfront residential project on Palm Jumeirah which will house 250 1-3 bedroom apartments. Details of their other developments were released. Discovery Gardens Pavilion will add a further 350k sq ft of retail space, along with a 350-key hotel, with construction to start in Q2 2018. A second – Jenan Heights – will see a 2.5k home gated community which will be linked to the upcoming 2020 Metro extension. Others include further expansion of the developer’s Jumeirah Park – 174 luxury 4-bedroom villas – and Jumeirah Park Leisure, with an Olympic-size pool and a16k sq ft gym.

Meanwhile Seven Tides will add 1k new apartments on Palm Jumeirah, as it develops SE7EN Residences. The 14-floor tower, located on Palm Jumeirah and adjacent to the developer’s Dukes Dubai Hotel and Apartments, will see studios selling for US$ 197k up to US$ 967k for 3-B/R apartments. The project should be completed within two years.

The first nine Business Bay “water homes” have been anchored in place, with the initial residents being chosen by lucky draw. The Finnish-built villas, on Dubai Canal, form part of Dubai Properties’ US$ 272 million Marasi Business Bay cluster, which will also incorporate an extensive retail and F&B promenade. The government-owned division of Dubai Holding has also launched the first of four “Marasi” towers.

Having already delivered 1.1k units in the first eight months of the year, Damac expects to add a further 1.7k by year-end that would bring its total lifetime delivery to 19.2k, with a further 42.3k in the pipeline. The Dubai-based developer has hinted that it may not launch any new local projects, as it considers that it may be as big as it can get in the UAE; in the region, it has projects in locations such as Amman, Beirut, Malta, Muscat and Riyadh. To expand its market base and revenue – and currently with only one non-regional project, Icon One residential and commercial tower in London – it is looking at other places including Croatia, Montenegro and Toronto.

Azizi Developments launched the second phase, valued at US$ 817 million, of its massive US$ 3.3 billion Azizi Riviera project. The total project, located in Meydan One, comprises 69 mid-rise towers, with 13k residential units and several hotels; phase 2 covers 17 buildings, housing 4k units. The high profile developer has announced that phase 1 had sold out on the first day of Cityscape Global whilst phase 2 was halfway there. It also intimated that it would launch an ‘iconic’ tower later in the year.

Kleindienst Group also released plans for “the world’s first underwater luxury vessel resort”, to be known as “The Floating Venice”. The US$ 681 million project, located off-shore on The World, will comprise 414 cabins over four decks (including one underwater), the world’s first underwater spa, 24 pools and 12 restaurants and will be able to host 3k guests every day. Gondolas will be in use to ferry guests through the canals to their cabins. The developer, who is also behind The Heart of Europe Islands, will also add 400k sq ft of coral for impressive viewing and expects completion by Q4 2020.

Sobha Group has launched phase 2 of its US$ 1.1 billion Hartland Gardenia Villas. Located on Dubai Water Canal in MBR City, the project covers four million sq ft, 60% of which will be green space.

Shuua Capital has unveiled plans for Dubawi – a mixed use hotel and residential tower, with 500 hotel rooms and 500 serviced apartments. The development, located on SZR, near to Business Bay, will be managed by Shuua’s own real estate asset management division.

Likewise, Deyaar Development announced its US$ 272 million South Bay project, located in Business Bay. The 63-storey structure will house 926 units of which 345 will be hotel rooms, 338 residential and 133 serviced apartments.

Danube Properties, with four projects totalling US$ 300 million to be delivered by year-end, will soon launch a new development, probably located in either Arjan or Furjan.

It seems the ongoing legal battles between developer, Five Holdings Ltd, and Viceroy Hotel Management are still some way from settlement. The US$ 1 billion Viceroy Palm Jumeirah Dubai opened in March but by June, the management contract was cancelled and the property’s name changed to FIVE Palm Jumeirah Dubai. Now there are claims and counterclaims involving how the hotel was run and managed with talk of  breach of trust, doctored invoices, fraudulent accounting, self-dealing, unapproved budget overruns etc. Currently, there are three court cases in Dubai and one in Los Angeles.

Union Properties is considering issuing sukuks as it looks at ways to finance its new property development strategy, totalling US$ 2.2 billion, which would require annual funding of US$ 545 million. The developer has signed an agreement with China State Construction Engineering Corp (who will help with finance) to build MotorCity that would include 18k units.

Q2 saw Union Properties post a net loss of US$ 627 million after provisions of US$ 763 million had been made. Now the company has confirmed that the developer’s long-term interests has been best served by the recent asset revaluation. UP is also to establish two new business units – Union Malls and Al Etihad Hotel Management – to further diversify and consolidate their revenue streams.

Saudi group, Alhokair, has opened MENA Plaza Albarsha Dubai. The MENA brand is expected to grow in the region, with the opening of the 90-room property.

In the 18 months to January 2017, there had been 71k property transactions, totalling US$ 41.1 billion, of which the Chinese ranked 8th with 2.2k deals totalling US$ 845 million. Now the DED is to take action to increase China’s participation in the Dubai sector and has appointed locally-based UC Forward with a Chinese partner to ameliorate this strategy.

According to BNC Network, there are currently 7.9k active building projects in the country with a value of US$ 227.8 billion Of this total, 35.7% of the buildings (valued at US$ 121.1 billion) are to be found in Dubai.

There was no surprise to read YouGov’s latest poll that sees the UAE retain its position as the region’s most desirable location for real estate investment – with Dubai being the most popular city for Middle East homeowners and investors.

Dubai Food Park and China’s Ningxia Forward Fund Management Company have signed a US$ 368 million agreement to build a UAE/Chinese Food Industrial cluster over two years. The 4.38 million sq ft project will cover six components, with an estimated 30 new food plants including two Chinese catering companies.

Emirates Healthcare Development Co has announced that it has obtained a US$ 101 million Islamic syndicated loan. The finance will be used by its Dubai-owned private Saudi German Hospital for operation and expansion purposes.

With artificial intelligence slowly inculcating everyday life, one of the first industries to feel the effects is the financial sector; all over the world, bricks and mortars are being replaced by clicks and sorters. Thus it is no surprise to see Mashreq announcing a 10% retrenchment, over the next twelve months, as the digital age takes hold. The chances of talking to a human voice are quickly diminishing and “your call is important to us” will become more prevalent and annoying in the future.

Last Saturday, Dubai Metro celebrated its first eight years in operation during which time, it has carried 1.028 billion passengers, of which 67% travelled the Red Line and the balance of 339 million travelled the Green Line. The system extends 75 km and is considered the world’s longest driverless metro line, as well as having the biggest underground metro station – Union Station, covering 25k sq mt. There will be a 15 km extension to the Red Line from Nakheel Harbour station to accommodate the upcoming Expo 2020 requirements.

It is reported that CVC Capital Partners could be interested its first ME investment, with UAE-based shisha maker Al Fakher Tobacco Trading, Emaar Properties PJSC’s entertainment division and certain education companies reportedly on their radar. The London-based buyout firm, with funds totalling US$ 85 billion, is one of a growing number looking at ME investments; last year, MENA reported a 26% hike, to US$ 28.5 billion, in the value of foreign buyers acquiring “local” assets.

The DFM opened Sunday (10 September), at 3644 and nudged 12 points (0.1%) higher to close on Thursday, 14 September, at 3656. Volumes continued on the thin side, with trading of only 108 million shares, valued at US$ 56 million, (cf 175 million shares for US$ 83 million, on Thursday, 07 September). Emaar Properties was US$ 0.03 higher at US$ 2.40, with Arabtec down a further US$ 0.04 to US$ 0.82.

By Thursday, Brent Crude was US$ 0.79 (1.4%) higher on the week, closing at US$ 54.49, with gold going against its recent upward trend, declining US$ 17 to US$ 1,333 by 14 September 2017.

Troubled Uber is facing three US legal probes, one of which involves an internal programme known as “Hell” that allowed the ride-hailing company to spy on rival Lyft’s drivers; this was reportedly used between 2014-2016 to entice drivers to work for Uber. Another programme – “Greyball” – was allegedly used to deceive regulators about certain of the company’s operations. The third investigation involves the possible payments to corrupt foreign officials. No doubt new CEO, Dara Khosrowshahi, already has his in tray full, with other problems including the appointment of a Global Head of Compliance, following the resignation of the incumbent, Joseph Spiegler, last week.

The Finnish mobile games maker, Ravi, expects to raise up to US$ 1 billion when it goes public on the Helsinki bourse next month. The company behind Angry Birds reported an annual profit of US$ 317 million, 79% of which originated from games and the balance from brand licensing.

John Lewis posted a 53.0% decline in H1 profits to US$ 36 million on the back of increases in higher costs (including pension and restructuring charges) and ‘dampened customer demand’. However, the Group, which includes Waitrose supermarkets, saw revenues 2.3% higher at US$ 6.4 billion, compared to the same period in 2016. Meanwhile Morrisons recorded a 3.0% Q2 hike in sales, whilst pre-tax profits climbed 40% to US$ 269 million.

It has been a good year for Qantas and its Irish chief executive. Having overseen 5k job cuts and the introduction of new routes, the airline has posted annual profits, as at June, of US$1.1 billion. Alan Joyce has seen his remuneration jump to just under US$ 20 million on the back of improved results and the airline’s shares rocketing.

The Head of the UK Financial Conduct Authority is in cuckoo land if he thinks that the 12k SMEs, who were unfairly treated by the RBS’s Global Restructuring Group during the period 2007-2012 would be happy hearing him decide that it would not be in the public interest to publish its full report. Although denied by the bank, it seems that it made matters worse for such customers so as assets could be seized for their benefit (and profits and bonuses). Evidently 92% of ‘viable’ firms, seen by the GRG met with “inappropriate” behaviour, including higher charges and increased interest rates.

In 2013, the Bank of England declared that it would consider raising interest rates once the unemployment level, then at 7.8%, came down to 7.0%. Since then the rate has fallen to a 42-year low of 4.3%. What has the Bank done? Nothing.

The experts were backing the Economics 101 theory that as employment levels rise, there is more competition for jobs which in turn push wage levels higher. One explanation is that the supply of EU cheap labour has kept wages down, backed by a BofE report indicating that a 10% increase in the ratio of migrant to native workers results in wages falling 1.88%. With annual inflation now at 2.9%, and wage growth lagging behind, the problem will not go away. However, as sterling hits a 15-month high of 1.355 to the greenback, there has to be a solid case for an earlier rate hike.

As widely expected, the ECB maintained all three interest rates unchanged – deposit at minus 0.4%, the main refi at zero and the marginal lending facility rate at 0.25%. This is expected to be the status quo at least until the tapering of the net asset purchases which will be kept at the monthly rate of US$ 72.2 billion (until at least December 2017), following the March change from US$ 96.3 billion.

Some will argue that Mario Draghi should ease off a lot quicker, bearing in mind that the ECB has already bought more than US$ 2.4 trillion worth of assets. It seems that Germany is leading the calls for QE to be curtailed especially now that most of the bloc’s countries are showing signs of solid growth. There is concern that ultra-cheap lending costs may see money going to finance marginal investment projects which could be a catalyst for another financial crisis. The ECB Chairman will be praying that this will be The Last Thing On My Mind.

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